Preamble

The House met at Ten o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Madam Speaker's Statement

Madam Speaker: As this is the first morning sitting under the new arrangements, it may be a help to Members if I make one or two points clear and for the record.
First, the House will have noted that times for each debate have been printed on the Order Paper. That means that the practice on the former last day Adjournments will be followed—that, if the House gets ahead of the timetable and the Member opening the next debate is not present, the occupant of the Chair will be able to suspend the sitting until, but not beyond, the stated time.
Secondly, I propose for the three half-hour debates to follow the practice to which the House is accustomed with the half-hour Adjournment at the end of each day's sitting—that no additional Member may take part except with the permission of the Member introducing the debate, and the Minister, and of course the Chair, should be informed.

Pergau Dam

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]

Mr. Jim Marshall: rose—

Hon. Members: Hear, hear.

Mr. Marshall: The House is far more crowded than one would usually expect during an Adjournment debate, and it is most unusual for my standing up to arouse a cheer as well, but perhaps we are making history in more than one sense today.
There is a certain irony in my luck in coming top of the draw, as I was one of those hon. Members and right hon. Members who voted against the change. Perhaps, Madam Speaker, either you or the gods are getting their own back by ensuring that I have to be here at 10 o'clock on the first Wednesday.
The second comment that I wish to make before I reach the substance of the debate is that, as you know better than I, Madam Speaker, and I am sure that the Leader of the House also knows, the House has sat on Wednesdays in recent times, although not regularly since 1967. The last time that the House sat on a Wednesday morning was on an overspill on the Consolidated Fund Bill debate—something that can no longer happen—on 28 March 1990.
The House decided to meet on Wednesday morning of 1 August 1984 because the House was going into recess. That is an interesting date also because now we do not reach August before we go into the summer recess. It is a sign that the times have changed with the Government. They want us out of the way now, rather than keeping us here in the House.
The House also met on Wednesday 7 November 1990, for the Queen's Speech. However, the last time that the House met regularly on Wednesday was on 25 October 1967, well before my time in the House, and I am sure a few years before your entrance, Madam Speaker.
I asked the Journal Office to obtain for me the front page of that day's Hansard, and it is obvious that some things never change, even though we may change our proceedings from time to time. After Prayers, the House started with a ten-minute Bill, the Travel Concessions for Seamen Bill, moved by Mr. Hector Hughes, who was then the Member of Parliament for Aberdeen North. It will not surprise the House to know that it was critical of British Rail. Hon. Members criticised British Rail for removing the travel concession for seamen going home after arriving in port; so that, as is habitual, British Rail was being criticised 27 years ago, as it is today.
The main item of business under the Orders of the Day—is shows how important those issues were then—was the Sea Fisheries (Shellfish) Bill. Some names to conjure with: Mr. Graham Page sought to move amendments, as did the then Mr. Ronald Bell; so there are some links between now and that time, 27 years ago.
I am delighted to be able to open the first Adjournment debate. I think that it does credit to you, Madam Speaker, or to the ballot, that we should be able to have a debate that is of real significance to this country's national interest and to the position of the poorest countries throughout the world.
The Pergau dam affair shows all that is wrong with the way that Britain gives its aid to some of the less poor countries of the world. To me, and I am sure to many other hon. Members, the affair still leaves a nasty taste in the mouth. Despite protestations to the contrary, it will always, to me and to others, be associated with aid for arms.
The Foreign Secretary has admitted, in his own singular phrase, to a "brief entanglement" between arms and aid in 1988. I have taken an interest in the issues of Bosnia and Europe generally over the past few years. One of the things about the Foreign Secretary is that he can always come up with a neat phrase. The tighter the corner he is in, the smarter and neater the phrase he comes out with.
To me, the phrase "brief entanglement" implies something a bit more than just a short time span. The then Secretary of State for Defence—the scion of the Scottish industiral family—made an error when he went to Kuala Lumpur in 1988 to negotiate arms and offered aid on the side. But in the Foreign Secretary's phrase, the affair was a "brief entanglement". There are those—mainly Opposition Members—who believe that the project would not have been proceeded with without the arms connection. To me it is a long affair, not a brief entanglement.
The case is also a bad deal for the United Kingdom taxpayer, and arguably a bad deal for the Malaysian electricity consumer. Funding the project by soft loans has increased the charge on the United Kingdom public purse by approximately £56 million more than if the project had been funded by a method of mixed credits. It has been estimated—I presume that the estimate is correct as I am not aware that its validity has been questioned--that Malaysian electricity consumers will pay £100 million more than if the electricity was generated by gas turbines. In economic terms alone, the project should not have been proceeded with.
Great credit is due to the World Development Movement for its courage in taking the Foreign Secretary to the High Court to seek a judicial review on his 1991
decision. We all know the outcome—the High Court agreed that the Foreign Secretary had acted unlawfully. We now know—because of the Foreign Secretary's statement and his response to questions on 13 December 1994—that the Government had no intention of appealing against that decision.

Mr. Dennis Canavan: Will my hon. Friend give way?

Mr. Marshall: I shall give way when I have finished making my point, but other hon. Members want to speak, and we have only one and a half hours for debate.
The Foreign Secretary must go further than his statement to Parliament on 13 December, and make two matters absolutely clear. First, he must state clearly that the Treasury will not be allowed to cut future spending allocations to the budget of the Overseas Development Administration in order to claw back future payments for the Pergau dam. The Foreign Secretary has already given that commitment for this year and for 1995–96, but his commitment must go further still to cover the lifetime of the project—for the next 10 to 11 years.
Secondly, the Foreign Secretary must give a commitment to repay fully the aid budget for all past spending, both on the Pergau dam and on the other three projects that might be deemed to be unlawful, and thus reverse the decision that he gave in the House of Commons on 13 December.

Mr. Canavan: I am grateful to my hon. Friend. On the illegality of the Secretary of State's action, does my hon. Friend agree that, if a local councillor had been found guilty in a court of law of misappropriating more than £20 million of public money for an unviable project against the advice of a senior official, that local councillor would almost certainly be surcharged, probably be banned from office for many years, if not for life, and almost certainly be bankrupt? Yet the Secretary of State for Foreign and Commonwealth Affairs carries on almost regardless. Should he not, in all honesty, resign?

Mr. Marshall: I agree with my hon. Friend's conclusion. Clearly, the Foreign Secretary should resign, together with all his Cabinet colleagues. To be fair to the Foreign Secretary—I am not usually fair to him—the High Court ruled that he acted unlawfully in using that piece of legislation. It did not rule that he was unable to provide funds to allow the project to go ahead. We are discussing the legality of the action under the 1980 legislation, not whether the Government had the right to provide money, which they clearly did. They simply chose the wrong vehicle to do so.
I was in the Chamber when my hon. Friend put the same question to the Foreign Secretary in person, and the response that I have just given was far more convincing than the one that the Foreign Secretary gave to my hon. Friend.
The Government's justification for the non-reimbursement of funding for previous years is that the aid and trade provision of the aid programme for previous and future years was set on the assumption that the cost of the Pergau dam and the three other projects would be met from it. In the Foreign Secretary's words,
the books for those years are effectively closed".—[Official Report, 13 December 1994; Vol. 251, c. 774.]
That is another neat phrase.
Books are either closed or not. What does he mean by "effectively"? Does he mean that, if pressure is exerted, the books could be reopened? Is he already anticipating his response when my hon. Friend the Member for Eccles (Miss Lestor) says to him, "You have been under pressure from the High Court or other quarters and have had to reopen the books; how does that tie in with your commitment of 13 December 1994?"?
I can already see the Foreign Secretary, in his usual languid manner, rising at the Dispatch Box and saying to my hon. Friend the Member for Eccles, "I said that the books were effectively closed." Perhaps that phrase means one of two things—the books are closed and cannot be reopened, or the Foreign Secretary is making an escape route for himself for the time when sufficient pressure is placed on him that the books have to be reopened and the payment repaid.
I think that we all accept that the reason that the Foreign Secretary has given and the arguments advanced by the Government amount to pathetic excuses. The Government's unlawful decision prevented lawful aid and trade provisions from going ahead—only one third of the


ATPs put forward for 1990–91 were proceeded with. If the Pergau dam project had not been approved, the way would have been left open for lawful ATPs. If the House did not wish to do that, the resources could have been put into the mainstream aid budget.
As a basic principle, the money which was spent illegally must be returned to the aid budget. If that is not done, the Government will have spent resources set aside for aid on non-aid purposes, in blatant disregard of the wishes and the authority of Parliament. The £24 million that was spent on Pergau could make a significant difference to the quality of life in a poor country.
The Pergau dam affair has cast a shadow over the credibility of our aid programme which must be removed. I believe that we should take this opportunity to review overseas development administration policy as it has not been reviewed comprehensively since the 1975 White Paper. My view—I believe that it is also increasingly the view of my party—is that our aid, both bilateral and multilateral, should be targeted at the poorest people in the poorest countries.
We should never forget that 1.2 billion people continue to live in poverty throughout the world. If we are to help to eliminate that poverty, we must give increased priority to the provision of basic education, primary health and safe drinking water—just three objectives among many. I contend that £234 million would provide a great boost to that policy development.

Mr. Michael Jopling: I rise on this important and historic occasion with a great deal of pleasure. Madam Speaker, you will recall that this Wednesday morning sitting—which I hope will be the first of a permanent series of such sittings—results from the unanimous recommendation of the Select Committee on Sittings of the House, which I had the honour to chair.
The four different types of private Members' business—the Consolidated Fund Bill debate, with its absurd all-night sittings which are hopefully now behind us; private Member's motions; Adjournment motions; and the last day Adjournment debates—can now be dealt with in the four-and-a-half hour sitting of the House every Wednesday morning. That is a very neat way of putting private Members' business on a regular footing, instead of dealing with it hurriedly just before a recess. It is a far more satisfactory forum for hearing hon. Members' concerns, and it is much more sensible for us to debate an important issue like Pergau at this time of the morning rather than at 4 am, as we probably would have done previously.
The hon. Member for Leicester, South (Mr. Marshall) referred to the parliamentary sittings in 1967. I may have been in the Chamber during the debate to which he referred—I recall taking part in the morning debates during the Crossman experiment. That experiment failed because the House was not prepared to accept those arrangements, and because the business which Mr. Crossman put on the Order Paper was much too controversial.
There is always a temptation for people to monkey about with controversial business, which is what happened in the 1960s. We are now accepting relatively non-controversial business on motions for the Adjournment, and I believe that that will prove very satisfactory for the House.
I am a member of the Foreign Affairs Select Committee, which held a number of hearings and produced a report about the Pergau dam affair late last year. I want to refer to the events leading up to the court's decision about the legality of the payments for the construction of the Pergau dam under the Overseas Development and Co-operation Act 1980.
The whole sorry saga of the Pergau dam began when my noble Friend Lord Younger, as he is now, signed the protocol in March 1988 in Kuala Lumpur. He maintains to this day that he did not do anything wrong, and he gave advice to that effect to the Select Committee. He said that he thought that the wording of the protocol was appropriate, and did not link aid with arms expenditure. However, the Foreign Office and the Government disagreed with that view, as did the Select Committee in its report. We felt that it was wrong for Mr. Younger to sign the protocol at that time.
The signing of the protocol has had a domino effect. I reflect the criticism in the Select Committee report when I say that I cannot understand why the Foreign Office or the Ministry of Defence allowed the protocol to be signed. The Foreign Office was totally ignorant of what was going on. The actions of the British high commission in Kuala Lumpur were totally disgraceful. It appeared to know very little about the reason for George Younger's visit to Kuala Lumpur, and it then failed to inform the Foreign Office what he had signed until some weeks after his return to this country. That is a lamentable state of affairs.
The whole project was appraised in a bizarre mission between 12 and 14 March 1989. Sir Tim Lankester, the permanent secretary, said—it appears in the Select Committee report—that the mission was "wholly unsatisfactory", and described it as a "lamentable slip-up." I agree with him. It is all very well for Sir Tim Lankester to complain about the viability of the scheme after the event; I think it is a pity that people within the Department did not pay more attention to the conduct of the scheme's appraisal and to the legal basis of the expenditure, which has since been overturned by the court as contrary to the provisions of the 1980 Act.
The events surrounding the Pergau dam affair have not been helped by the machinations of the consortium of contractors. The Select Committee was critical of those contractors, and I think that their behaviour does them little credit. Having said that, I entirely understand why it was impossible to stop the Pergau dam project dead in its tracks once the first mistake of signing the protocol had been made. That could have had massive ramifications for our relations with Malaysia—which are delicate at the best of times—and badly affected our important trade with that country. Undertakings had been given by the then Prime Minister, Mrs. Thatcher, and I believe that the Government were right to uphold the undertakings which were given at that time.
I now turn to the issue at the core of what the hon. Gentleman is raising in his one-and-a-half hour Adjournment debate—the judgment of the courts, which nobody really anticipated. The hon. Member for Falkirk, West (Mr. Canavan), who interrupted the hon. Member for Leicester, South, is also a member of the Select Committee for Foreign Affairs.
If he were still in his place, I am sure that he would agree with me, as would my hon. Friend the Member for Broxtowe (Mr. Lester), who is also a member of the


Select Committee, that, although the World Development Movement told us that it considered the payment to be illegal, nobody else, on or off the Committee, also reached that conclusion. Although we heard what the World Development Movement had to say, none of us set very much store by it. The World Development Movement was right, however, and the rest of us were wrong.
Returning to the intervention by the hon. Member for Falkirk, West, he sought to link the court case, which was about the legality of the payment under the 1980 Act, with the advice and the objection by Sir Tim Lankester, which was based purely on the viability of the scheme and had nothing to do with the legality of the payment. Those two issues are quite separate, and I wish that the hon. Gentleman were still in his place so that he could hear me say that.

Mr. George Foulkes: If the right hon. Gentleman checks back on parliamentary questions that have been tabled over a number of years, he will find that a number of my right hon. and hon. Friends questioned the legality of the project.

Mr. Jopling: I accept that there have been questions which suggested that. I would guess that those questions might have been inspired by conversations with the World Development Movement. I do not think that there was any advice in or out of the Select Committee to the effect that the payments were illegal, except from the World Development Movement. Therefore, the judgment was a surprise.
I applaud the statement of the Government, complying with the judgment of the court, that money will be found from the reserves—£34.5 million this year and £31 million next year—to put right what the court has said was wrong, and that seems adequate.
Referring to previous years, I am not clear how and whether it would be appropriate or sensible to reopen previous years concerning the £24 million. It seems to me that that is water over the dam, and I could not support pressure to make the Government find that £24 million as well. Of course, the World Development Movement is doing everything it can—it may go back to court, for all I know—to insist that that £24 million is found, but those books are closed. They refer to years gone by and I should be very surprised if it were possible to find that money.
The third part of the money is in future years, and that has also been referred to in the debate. There is no way in which the Government can commit themselves—before we have entered into the specific public expenditure survey rounds—to be absolutely clear about what will happen in 1996–97, but when the Foreign Secretary made his statement on 13 December, he pointed out that the overseas aid budget is to increase by £56 million in 1996–97 and by £115 million in the following year. That will be the baseline for discussions at that time.
Finally, I want to say a word about the aid and trade provision. We should remember that it was introduced by the Labour Government in 1977. We ought also to recall that only 6 per cent. of our aid budget—rather less, I think—goes on ATP and, what is most important, since the Pergau affair the rules have been changed and it would be impossible for Pergau to be financed now to ATP, as it was then.
I am glad that the Select Committee report endorsed the use of ATP, and was not in favour of its abolition. ATP is a very good scheme. I welcome the use of the aid budget to encourage British trade and the preservation of British jobs.
Although the Select Committee was not in favour of an extension of it above 6 per cent., I would not object at all if the ATP budget were increased. It would be to the advantage of British industry, as ATP has had very good effects and repercussions on jobs and industry in this country. It is a pity that the statistics are not sufficiently clear for us to be precise about just what advantages have been gained over the years from the ATP provision.
With those remarks, I look forward to hearing what my hon. Friend the Minister has to say. In particular, I think it would be interesting if he could give us some an idea of how the extra £34.5 million this year is likely to be spent. The Foreign Secretary referred to Bosnia, but there may be other provisions, and I am sure that the House would like to know where the money is going.

Mr. George Foulkes: I first congratulate my hon. Friend the Member for Leicester, South (Mr. Marshall) on obtaining his debate on this historic first Wednesday morning sitting, at least for a number of years. I am pleased to follow the right hon. Member for Westmoreland and Lonsdale (Mr. Jopling), who is responsible for us sitting on Wednesday morning. I am glad to see him here today, and look forward to seeing him regularly on Wednesday mornings.
I also emphasise that my hon. Friend the Member for Leicester, South, who so ably put his case today, has the total support of those on the Opposition Front Bench in the arguments he put forward.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tony Baldry): In the Labour party, support from the Front Bench counts as a novelty.

Mr. Foulkes: The Minister will have the opportunity to speak later. He is noted for his sarcasm rather than his humour. My hon. Friend has the total support of the Opposition in seeking the debate, and in everything he said.
Today's much-needed debate on repayment of the money that was so scandalously wasted on the Pergau dam is an issue that, contrary to what Ministers and Conservative Members say, is in no way resolved. It may seem to the Foreign Secretary, a small discrepancy in his bookkeeping, but, to millions of people throughout the developing world who are dependant on British humanitarian aid, it can mean the difference between life and death.
The Pergau dam affair, from the original infamous entanglement of arms sales and aid, arising from the improper deal signed by Lord Younger on 23 March 1988, all the way through to the High Court ruling and the Foreign Secretary's stubborn refusal to accept it, has been one of the sorriest sagas of this discredited Government.
On 9 and 10 November last year—nearly three months ago—the High Court heard the World Development Movement case for a judicial review of the Foreign Secretary's decision. The WDM deserves the thanks and


congratulations of the whole House for that action. The challenge to the Foreign Secretary's decision was based on the Overseas and Development Co-operation Act 1980.
The judgment held that the Foreign Secretary's decision was unlawful, and that future payments from the aid budget were to be halted. We do not congratulate the Foreign Secretary on doing that, because he was so instructed by the High Court. Equally important, the High Court instructed the Government to reveal to the World Development Movement how they intended to put right the aid payments made so far.
By comparison, the Government quickly stated their intention to meet their contractual obligations to Malaysia, no doubt under legal threat from its Prime Minister, Mohatmir Mohammed. However, the High Court ruling explicitly stated that the WDM must be informed how the Foreign Secretary planned to make good the overseas aid budget. When will it receive a similarly quick response? It still awaits one. Once again, the interests of British companies and of trade relations with Malaysia have taken precedence over the needs of the developing world.
In the House, the Foreign Secretary first ignored many legitimate requests for his resignation, and even mild requests for an apology for the unlawful action that had been taken. Now, the right hon. Gentleman is blatantly attempting to avoid the implications of the judgment. The High Court specifically instructed the Foreign Secretary
to take appropriate steps to make good the deficiency in the overseas aid budget.
It could not have been clearer.
The Foreign Secretary had the gall to tell the House that he believed that not paying back the £24 million that unlawfully went to Malaysia in that "brief entanglement" as he described it, was "an equitable way" of dealing with the difficult situation that had been created. That is unbelievable. The right hon. Gentleman's view of what is equitable is of no great relevance to the House, and his view of the matter has been shown by the High Court to be fundamentally flawed, and an insult to right hon. and hon. Members and to the British judiciary. Above all, his view is an insult to the people who desperately need the £24 million that the Foreign Secretary is so anxious to keep.
The Labour party is not opposed to the aid and trade provision. We were reminded today as on previous occasions by the Under-Secretary of State, with his usual sarcasm—

Mr. Baldry: The hon. Gentleman mistakes humour for sarcasm.

Mr. Foulkes: It may seem like a sense of humour to some people, but it seems like sarcasm to this side of the House. We do not need to be reminded that a Labour Government introduced the aid scheme. We are proud that Judith Hart introduced it in 1978, but that is not the scheme currently pursued by the Government. The original scheme was intended to allow a small proportion of bilateral aid of about 5 per cent. to be available, to give higher priority to the commercial importance of a limited number—these are the key words—of "developmentally sound projects."
We find objectionable the systematic abuse and corruption of the scheme under a Conservative Government to satisfy Tory central office, the awarding of tenders to companies donating large sums of money to

Tory party funds—no doubt to pay some of the heavy legal fees that it must reimburse The Guardian and other newspapers, manipulation of the aid budget to further the sale of British arms and the financial interests of the Government's family and friends, and the Government's refusal to admit dishonesty and at least attempt to make amends.
The legal basis for aid payments was agreed by the House in 1966 and 1980. It gives the Foreign Secretary to authorise aid payments, but only
for the purpose of promoting the development or maintaining the economy of a country or territories outside the UK, or the welfare of its people".
That was not the purpose of the Pergau dam. As the Foreign Secretary told the Foreign Affairs Committee, there were "wider considerations", such as
a clear understanding at the highest level
and
the interests of British industry.
Ironically, the Committee and the Overseas Development Administration's own study of the programme showed that it will not create jobs or orders for British industry, so it cannot be argued that Pergau would help in that way. It boils down to
a clear understanding at the highest level
I cannot believe that George Younger, who was Mrs. Thatcher's leadership campaign manager, did not have his leader's words ringing in his ears when he signed that fateful arms-for-aid deal in 1988. It was not for nothing that Mrs. Thatcher was nicknamed by a former Leader of the House
she who must be obeyed.
The following year, on 15 March 1988, Mrs. Thatcher met the Malaysian Prime Minister and sealed the deal on the basis of incomplete information about the cost to the British taxpayer. Over the next two years, it became clear that the Pergau project was not developmentally sound but uneconomic and, in the words of the ODA's own appraisal, "a very bad buy" for Britain and
a burden on Malaysian electricity consumers.
In 1991, the ODA's Permanent Secretary, Tim Lankester, and the Minister for Overseas Development, Lady Chalker, reached the conclusion that the project was not sound, yet on 26 February 1991, after consulting the Prime Minister, the Foreign Secretary gave his final approval.
Why did the Foreign Secretary do that, against all professional and, I believe, legal advice? Why did he approve a project that would help neither British jobs nor Malaysian consumers? We should not be surprised that he did, when we realise that nearly all the companies that benefit from ATP donate to Tory party funds. We should not be surprised, because of the particular interest taken in Pergau and in the Ankara metro project by the then Prime Minister. Despite all her other tasks, she took a particular interest in those two projects.
When I asked the Minister what other projects the Prime Minister had asked to be put on her desk, he said that it would cost too much to tell the House. It is time the House knew of all the ATP and other projects that found their way on to Mrs. Thatcher's desk before they were approved.
Because of her special relationship with the Malaysian Prime Minister, she was also keen to see British arms sales to Malaysia proceed. One hon. Friend pointed out to


me that a report in The Times today says that our Export Credits Guarantee Department programme is distorted by high expenditure on the arms trade. Although the Prime Minister formally de-linked the "separate but parallel letters", there was still a strong relationship between them. The Prime Minister might also have had a close family interest in the project.
Downing street's involvement in reviewing ATP projects is particularly disturbing. The overruling of countless officials, discontent of Cabinet Ministers, protests of non-governmental organisations and press editorials were all ignored by the Government. It took action by the World Development Movement in the High Court to force the Foreign Secretary to admit that he had acted illegally in spending aid money on Pergau. A further refusal to abide by the judgment and to repay the money has caused unmitigated outrage, and rightly so.
The case for repayment is straightforward. The Foreign Secretary has used the lame excuse that the books for previous years are effectively closed. However, it was made clear in response to a question put to the Foreign Secretary's counsel in a preliminary hearing that provision existed for retrospective rearrangement of funds. In other words, the Foreign Secretary's representative said that the books could be reopened, and they should be. It seems that the interpretation of the laws of the United Kingdom depend on which side of the law the Government are operating on.
The Foreign Secretary also stands accused of contempt of the authority of Parliament. He seems to be of the opinion that the aid budget was set on the assumption that the Pergau project would be financed from within it, so provision would have been less if the project had not been included. However, the House did not vote on individual aid and trade projects when it voted for the aid budget in 1991. The ATP allocation appears as a total figure, not as a list of individual projects. Parliament voted the ATP money on the assumption that it would be used for genuine developmental projects. That has not been the case. The House has been ignored.
The money refused by the Foreign Secretary also provides a compelling argument for its return to the aid budget, which has fallen to 0.3 per cent. of gross national product. The bilateral aid budget has declined, and it desperately needs the money that could come, as it were, from the Pergau project. Africa and all poorer countries of the world desperately need the money.
In conclusion—that will please Noddy, the Government Whip. Even more important, Madam Speaker, it will please you.

Madam Speaker: I have an interest in Back-Bench Members.

Mr. Foulkes: So do I, Madam Speaker.
The Pergau dividend, which was successfully won by the World Development Movement, could be used to fund many grass-roots projects which have disappeared from the forefront of British aid.
The Government must be aware that any attempt to cut the aid budget in other areas will be vigorously opposed by the Opposition. Attempts at retribution by the Foreign Secretary will not be accepted. The Labour party wants—indeed, demands—that the money misappropriated from

the aid budget be immediately restored. The restoration of credibility to the United Kingdom's aid programme is badly needed to remedy what has become one of the most sickening examples of the susceptibility of this discredited Government.
The only thing that will satisfy the House, non-governmental organisations and the law is that the future payments earmarked for the Pergau project be targeted on the poorest people in the poorest countries—in other words, not only the £24 million that has previously been wasted on the project.
The Minister must say how the Government intend fully to implement the decision of the High Court. If not, it will be open to the World Development Movement, as the right hon. Member for Westmorland and Lonsdale rightly said, to return to the High Court to seek legal redress. The Opposition would encourage the WDM to take that action, to ensure that the Foreign Secretary is made to obey the law of the land.

Mr. Jim Lester: The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) spoke from the Opposition Front Bench in his usual colourful, florid and inaccurate way to try to build up a case that was out of all proportion. I have spent 20 years in the House using my energy to improve the transfer of resources from this country and other developed countries to developing countries, for the relief of poverty and for the integration of the world economy, and I speak from that background.
The Select Committee on Foreign Affairs took an enormous amount of evidence on this controversial issue, made recommendations and identified areas of concern. There is no point in a Select Committee taking that course if Opposition Front-Bench spokesmen repeat assertions that have been disproved, including links between arms and aid, and continually repeat charges that have been clearly demonstrated by others, including Opposition Members who sat on the Select Committee, to be untrue. The Select Committee examined the matter with considerable concern, including aid and trade provision.
It is interesting that Malaysia, which was a very poor country and qualified for ATP when the Pergau dam was authorised, no longer qualifies for such provision. That is a tribute to the success of aid programme development. Countries such as Malaysia have succeeded in getting themselves into the world economy, much to the benefit of the majority of their peoples.
We recognise that ATP has, always been an extremely difficult horse to ride. It is difficult to qualify what is developmental aid and what is assistance to business men who make quotations for major projects. To my recollection, the Select Committee has considered the issue on at least three occasions and has made various recommendations. It must be recognised that, in an imperfect world, it is an extremely difficult issue.
The United Kingdom is one of the few countries that has a limit on ATP. We have limited it to a maximum of 9 per cent. of our aid budget of £2 billion. Other countries use most of their aid budget to assist their own commercial development. The United Kingdom is more restricted because we have much tighter rules than other countries.
It is a misconception that the money spent on the Pergau dam should be available for the bilateral aid programme. The hon. Member for Leicester, South (Mr. Marshall) did not make that mistake. Instead, he said that the money should be used within ATP. The changed rules limit ATP to countries with low per capita incomes and countries with much smaller projects.
My principal concern is that the concept of the dam has been much undermined by what has happened in this country. I feel that strongly. The evidence shows that there is a narrow technical argument in the Overseas Development Administration not about whether the dam should be built but about when it should have been built in terms of the Malaysian electricity cycle. It was a question whether it should be built immediately or in 10 years' time. In the end, the argument turned on who had the most interest in and knowledge of what should happen in Malaysia—in other words, whether the Malaysians should go ahead or whether ODA officials, who took an interested but narrow view, should decide when or whether it should proceed.
The hon. Member for Leicester, South talked about targeting poverty. I have seen various projects throughout the world and it is my experience that the provision of electricity in areas where hitherto there was none, such as the townships of South Africa, can do far more to target poverty—in the sense that it brings an area to life, enables factories to be built and provides a basis for jobs to be created—than projects which bring clean water, education and social services, although I do not seek to undermine those.
It is a great mistake to imagine that the provision of essential infrastructure does not relieve poverty in a positive way. It is understandable that the Malaysians wanted to develop an area of their country that had no electricity. It is understandable also that they wanted to develop a regional project. It has been a successful project. Nobody has ever suggested that the price that was eventually arrived at when the design work was done was unfair. Nobody has suggested that the dam is a white elephant. It has not been suggested that the dam will be anything but a successful project within the Malaysian electricity cycle.

Mr. Foulkes: That is not true.

Mr. Lester: It is true. The project is nearly finished, and it will be successful.
Harping on, moralising and repeating assertions undermine precisely what I, my hon. Friends and Opposition Members who form the all-party group seek to do. Disinformation about sleaze, linkage with arms and corruption, which is not borne out by the facts, only reinforces those who seek to oppose the transfer of resources from the United Kingdom to developing countries. and to close down the aid programme as an easy way to save public expenditure. It damages all that one seeks to do.
In the real world, one must negotiate resources with the Treasury. Our current Foreign Secretary—one of the most capable and committed Foreign Secretaries that we have had for a long time—succeeded, despite all the difficulties, in getting an increase in the aid budget. We all know about the 0.3 per cent. and the 0.7 per cent., but to get an increase in the aid budget out of a difficult public expenditure round is a matter for congratulation, not castigation. I understand that the £24 million already spent

was a matter of considerable negotiation with the Treasury and the Foreign Office came out with a reasonable deal. We can all argue for perfection, but we should also argue from reality and from accurate information. I hope that I have at least tried to put the balance right in terms of the argument.

11 am

Mr. Mike Watson: I welcome the opportunity to participate in this first ever Wednesday morning debate under the new arrangements, and I join my colleagues in congratulating the right hon. Member for Westmorland and Lonsdale (Mr. Jopling) on the part that he played in getting us to where we are.
In a way, I am glad that my hon. Friend the Member for Jarrow (Mr. Dixon) is not with us, as I know that he was not an enthusiastic advocate of the new arrangements and is even less enthusiastic about my urging that we should go yet further. I would like the House to sit on Tuesday, Wednesday and Thursday mornings and for Mondays and Fridays to be entirely constituency days. If anybody tried to suggest that I or any other hon. Member would be working only a three-day week as a result, I should have no problem in refuting that. None the less, we have taken the first steps towards more sensible hours and I am glad that we have the opportunity—

Madam Deputy Speaker (Dame Janet Fookes): Order. I allowed the hon. Gentleman a little latitude, but he must now return to the subject.

Mr. Watson: I am happy to do so, Madam Deputy Speaker.
The aid community and, for that matter, the developing world, owes a twofold debt of gratitude as a result of the recent developments in the Pergau dam affair: first, to the World Development Movement for having the foresight to challenge the Government on spending on the Pergau dam and on the wider question of the methods by which the Government operate their aid policy, and for having the determination to see the case through to its successful conclusion; secondly, to Lord Justice Rose for his judgment of 10 November last.
Historic though that judgment was in reining in the Government's increasing tendency to act with impunity, it confirmed the trend of the courts in being prepared to dive in and swim around in those murky waters which not much more than a decade ago were regarded as the exclusive domain of the Executive. The willingness of the judiciary to allow an organisation such as the World Development Movement to pursue a judicial review must be welcomed.
If the wider result of the judgment is that it succeeds in curbing Executive power, that will meet with widespread acclaim from every direction but Whitehall as it fits into the unpleasant pattern of Cabinet Ministers having to be told by the courts that they were acting illegally—a previous Home Secretary on a deportation case and the current Home Secretary in relation to compensation for victims of crime.
My pleasure at Lord Justice Rose's judgment was tempered by the Foreign Secretary's grudging acceptance on 13 December 1994 when he addressed the House on the Government's response to the judgment. There was no contrition whatever. There was no admission of guilt and no apology. No regret was shown, except at the fact


that they had been found out, which these days seems to be the only crime to which they are ever prepared to admit.
Despite failing to hold his hands up and say, as it were, "It's a fair cop, guv," in true Dixon of Dock Green style, the Foreign Secretary asked for three other offences to be taken into account, which was interesting to say the least. They were the Ankara metro project in Turkey, a television studio project in Indonesia—we could ask all sorts of questions about whether we should have relationships with countries with such human rights records—and the flight information project in Botswana. The latter two have been completed and the first will be completed in 1997.
In total, they amount to some £35 million worth of aid—relatively small beer in terms of the £234 million earmarked for the Pergau dam project, but again they form a pattern: a culture of deception, of disguised intentions with regard to aid funding, of hidden agendas and the end being held to justify the means. That is not a philosophy to which I and my hon. Friends would subscribe, particularly in regard to such an important area as overseas development aid.
In his statement on 13 December, the Foreign Secretary refused to reinstate the £24 million already taken—illegally, it emerges—from the already depleted ODA funds. In effect, as my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) said, money was effectively stolen from the poor in the developing word. Attempting to justify that, the Foreign Secretary said:
But the aid and trade provision of the aid programme for previous and future years was set on the assumption that the cost of Pergau and the other three projects would be met from within it …It is not self-evident to me or to the Government that the Government should in consequence ask the taxpayer for additional money to allow the ODA to expand its aid activities."—[Official Report, 13 December 1994; Vol. 251, c. 774.]
In other words, those who never had it will never miss it. Let the Government tell that to the starving millions of sub-Saharan Africa, where on the ODA's own calculations the percentage of total British aid will fall from 14.4 per cent. in 1994–95 to 12.1 per cent. in 1997. If there is not a need to make up that deficit now, I do not know when there ever will be. We shall not convince the Government of the need if they can claim that the books are closed while at the same time aid to that deserving part of the world is decreased in terms of our overall aid budget.
A modest increase in aid was announced by the Chancellor of the Exchequer to take place, I believe, in 1996–97 and 1997–98. Unlike most other European Union member states, however, the Government refused to promise extra funding for the overall aid budget to take account of the need to increase European aid by 60 per cent. by the end of the century. That decision was taken at the Edinburgh summit in December 1992 and it leaves us in a disadvantageous position compared with our fellow members of the European Union.
The Organisation for Economic Co-operation and Development, which sets aid guidelines for 25 of the richest nations, recently reported that Britain was the only member among the top 12 donors whose aid budget had declined over the past 10 years. It warned that bilateral

aid to poor countries—the main purpose of the total aid programme—of some £2.3 billion will be severely cut if Britain is to meet the 60 per cent. increase in EU aid without coming up with any other funding.
That target would absorb up to one third of British aid, compared with the current figure of one fifth. It is in that context that Opposition Members demand that the funding earmarked for Pergau and the other projects to which I referred, which must be reinstated, should be set. Even if the full outstanding part of the £234 million over the next decade is not reinstated, at the very least the £24 million already illegally diverted must be restored.
As my hon. Friend the Member for Leicester, South (Mr. Marshall) so eloquently put it in opening the debate, why should the books be closed for those years when it is admitted not just that a mistake was made but that the Government acted illegally? If I broke into the office of a colleague, stole something and was found guilty, I do not believe that it would be right for me to be told, "You don't have to give it back—all you have to do is to ensure that you don't do it again in the future." There is something bizarre in the Government's saying, "Well, yes, we were caught out, but we'll close the book on it," effectively pretending that it did not happen.
I was not convinced by the argument made by the right hon. Member for Westmorland and Lonsdale, who said that one cannot expect the Government to look into the future, and I agree—particularly for a Government who do not have a future. None the less, they have announced figures for increases in aid for 1996–97 and 1997–98, so they are at least willing to look that far ahead. I am not sure where they find the confidence, but they are prepared to do that although they have not been prepared to give a commitment in respect of the Pergau dam aid funding.
That has been only for this year and next year. If the Minister will not accept the Opposition's pleas, he should remember that the High Court judgment instructed the Foreign Secretary to replenish the ODA funds which had been diverted for that ill-starred project. I hope that the World Development Movement will consider returning to the courts if the Minister confirms, as I expect that he will, the Government's refusal to reopen the books and to make good the deficit that has been identified.
The retrospective rearrangement of funds, which was mentioned in court, is well merited in its own right. The arguments have been eloquently put. Under Lord Justice Rose's judgment it is obligatory, but most of all it is needed by the poor of the world, who have consistently been sold short by the Government in their aid programme despite the rises for the next two years to which I have referred.
Money was stolen from the poor of the world despite the Government's stated intention that their aid budget was to deal first and foremost with poverty. The Government must not be allowed to get away with their ill-gotten gains. Those funds should be reinstated and I urge the Minister to announce the intention to do so today.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tony Baldry): First, I congratulate the hon. Member for Leicester, South (Mr. Marshall) on introducing the debate and providing the Government with a further opportunity to state their position on the aid and trade programme and on the particular event in question. We welcome that.
I also welcome the fact that my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) was able to take part in the debate. It is due to the initiatives of the Committee that he chaired that we are able to have Wednesday morning sittings, which will be much welcomed by hon. Members. As a senior member of the Foreign Affairs Select Committee, his contribution was valid and valuable. It should be noted that he and my hon. Friend the Member for Broxtowe (Mr. Lester), also a member of the Foreign Affairs Select Committee, endorsed and supported the Government's approach to the matter.
I am delighted to see the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) on the Opposition Front Bench. I believe that this is the first time he has spoken at the Dispatch Box since taking on his new brief. I was not entirely sure who would be the Opposition's Foreign Affairs spokesman this morning as I noted that the shadow Foreign Secretary was making a speech today on clause IV. Everyone in the Labour party now has to make speeches on clause IV, even those who supposedly have responsibility for foreign affairs. The shadow Foreign Secretary may be able to explain to the Labour party that it is now the only democratic party left in Europe which—

Madam Deputy Speaker: Order. The Minister is trying my patience. He must return to his brief.

Mr. Baldry: I was simply welcoming the hon. Gentleman to the Dispatch Box and pointing out why it was that only he appeared to be free this morning to take part in the debate. However, I appreciate the sensitivities in the Labour party about the debate on clause IV.
The United Kingdom has a substantial aid programme of some £2.28 billion this year, praised for its quality and focused on helping the poorest in the world. Nine of the 10 biggest aid recipients last year were poor countries in Africa and Asia. Former Yugoslavia—Bosnia in particular—was the other main recipient.
Our purpose is to help people in countries poorer than our own to improve their lives. In doing this of course we are keen to link with British companies and British consultants wherever it makes sense to do so, as we do with British non-governmental organisations such as Oxfam and Save the Children.We link with them because they can provide the advice, know-how, products, experience and expertise which can be of benefit to the development of the countries that we help. We should be proud that British money, British talent and British expertise is being devoted to help many of the poorest in the world.
The aid and trade provision was established in 1977 by a Labour Government, as has already been commented on and acknowledged. It has enabled the UK to promote development in areas where British companies have much to offer.
ATP is a successful scheme. It is successful in helping poorer countries in that the approximately £1.4 billion which has been committed to support development projects overseas has led to nearly £4 billion of British exports. My right hon. Friend the Member for Westmorland and Lonsdale asked whether we had the figure and that is it. It has led to substantial exports for the UK. That is good news for Britain, good news for UK jobs and good news for exports. It is particularly good

news for those countries which have benefited from these projects. Not surprisingly, the Foreign Affairs Select Committee concluded that ATP should continue.
As the House will know, my predecessor, the hon. Member for Morecambe and Lunesdale (Sir M. Lennox-Boyd), announced in June 1993 new procedures for ATP projects. All ATP projects approved since the new procedures were introduced fully meet the criteria laid down in the Overseas Development and Co-operation Act 1980, as now interpreted by the divisional court. Following the judgment of the divisional court in co-operation with the National Audit Office, there was a review of all projects receiving finance under the aid and trade provision to see whether any of the projects approved under our previous understanding of the Act might fall outside the interpretation of the legislation given by the divisional court. Three projects raised concerns, so following the judgment it was made clear to the House that arrangements would be made for the outstanding commitments to Pergau and the other three projects to be met from funds voted by Parliament outside the scope of the Act.
As to the past, the aid and trade provision of the aid programme was set on the assumption that the cost of Pergau and the other three projects would be met from within it. The books for those years are now closed. Therefore, as the House will know, we concluded that in respect of spending on those projects in previous years no adjustment would be made to ODA's future budget. The planned aid programme for the present and future years again contains provision for all four projects. Spending on the four projects is expected to be £32 million this financial year and £32.7 million next year.

Mr. Hugh Bayley: rose—

Mr. Baldry: We have therefore decided that funding from the reserve will be provided to meet the costs of the four projects, thus making available an extra £32 million for the aid budget this year and £32.7 million next year for overseas development. I am sure that the vast majority of people will find that a fair, reasonable and equitable outcome. I am sure that the vast majority of right hon. and hon. Members consider that to be a fair, reasonable and equitable outcome.

Mr. Bayley: rose—

Mr. Baldry: That is evidenced by the fact that today's debate has been attended by only a handful of Opposition Members. This does not seem to be a House in which there is considerable doubt about whether the outcome is fair, reasonable or equitable.

Sir Peter Emery: One of the things that I note has not arisen in the debate, most of which I have heard, is that however much many of us might wish to see aid to the rest of the world which is in need increased, many of my constituents feel strongly that some charity belongs at home, and they see great difficulties with such increases when the Government are refusing to give money for the elderly and for many other projects. That must be taken into account. It is no good dismissing it. That is what is felt by many of my constituents.

Mr. Baldry: My right hon. Friend illustrates the fact, which was commented on by my hon. Friend the Member for Broxtowe, that every year the Government have to


make difficult decisions in the public expenditure survey. My right hon. Friend the Foreign Secretary is to be congratulated on the fact that this year, next year and the year after that, the overseas development budget will be increasing year on year so that we shall be able to devote more resources to helping the poorer nations.

Mr. Bayley: rose—

Mr. Baldry: I shall give way to the hon. Gentleman, who has been something of a yo-yo in the debate. I think that he has only been present for a short part of it, but I gladly give way to him.

Mr. Bayley: I am grateful to the Minister. I am sure that he will agree that it is important to ensure that any future ATP projects are funded within the ODA's rules. Following the Pergau debacle, the ODA changed its rules: in future, ATP would be given only to countries with a per capita gross national product of less than $700. On 18 November, in answer to a parliamentary question, the Minister gave me a list of ATP projects that had been approved for funding since June 1993, when the policy changed; it included four projects worth a total of £16 million—

Madam Deputy Speaker: Order. The hon. Gentleman is now beginning to make a speech. Interventions, by their nature, must be brief.

Mr. Baldry: Perhaps I may anticipate the hon. Gentleman's point. Before Christmas he issued a press release asserting that Ministers had approved projects in defiance of the policy announced in June 1993 that new ATP projects would be approved only for countries with an income per head not exceeding $700 in 1989. That policy has not been breached: the four projects to which the hon. Gentleman's December press statement referred were approved well before June 1993, as my right hon. and noble Friend the Minister for Overseas Development made clear to him subsequently in correspondence.

Mr. Bayley: That is not what the parliamentary answer said.

Mr. Baldry: Perhaps I could make some progress.
As far as I can see, the only organisation—apart from the official Opposition—that does not consider the Government's approach fair, reasonable and equitable is the World Development Movement. It does not consider the extra £65 million for the aid budget to be reasonable. So be it; the WDM may seek to return to court if it wishes, but I am confident that we shall be found to have acted properly and reasonably.

Mr. Foulkes: Will the Minister give way?

Mr. Baldry: No. The hon. Gentleman made a long speech—so long that it tried your patience, Madam Deputy Speaker, and you told us as much.
We are putting the extra money to good use, as we put all the aid budget money to good use. In the current financial year it will enable us to provide, for example, additional emergency aid for Bosnia and Rwanda, and to deal with the crisis in Chechnya. We are financing general relief supplies through the International Committee of the Red Cross, the United Nations High Commissioner for

Refugees and other non-governmental organisations that are working for the 400,000 people who have been displaced by the tragedy in Chechnya. Britain will give up to £1 million for international humanitarian efforts to help those injured or made homeless in the fighting; the money will be used to provide food as well as blankets, plastic sheeting and clothing to protect people from the extreme weather conditions in the region.
We shall also be able to respond to specific appeals from the UN and the Red Cross, and to work on joint projects with the World Health Organisation and other multilateral organisations which are intended to deal with primary health care needs in developing countries. Allocations for the next financial year are still to be decided, but aid for the poorest in Africa and Asia is our priority. I assure my right hon. Friend the Member for Westmorland and Lonsdale, and others who asked me about the money, that it is being put to very good use supporting our humanitarian work throughout the world.

Mr. Foulkes: I welcome what the Minister has said, but he has not yet told us—and he has only a few minutes left—how the Foreign Secretary will implement the court's third decision. When will he meet the World Development Movement to explain how he intends to put right the aid payments that have been made so far? That is what the court decided should be done; how will the Government fulfil its decision?

Mr. Baldry: The hon. Gentleman clearly did not listen to what my right hon. Friend the Foreign Secretary said before Christmas, or to what I have said this morning. Furthermore, he obviously was not particularly well briefed by the World Development Movement. The Treasury Solicitor wrote to the WDM on 23 January, setting out the Government's position.

Mr. Foulkes: rose—

Mr. Baldry: Sadly, the need for emergency aid has never been greater than in recent times—

Mr. Foulkes: On a point of order, Madam Deputy Speaker. I am aware of the existence of the letter to which the Minister referred, but has it been placed in the Library of the House? It has not been circulated, but it ought to be the property of the House as well as the World Development Movement. Surely it is improper for the Minister to refer to a letter that has not previously been circulated to hon. Members, although they are aware of it and it is central and material to the important point with which we are dealing.

Mr. Baldry: I am more than happy to make the letter available, and to place it in the Library. It repeats very clearly what my right hon. Friend the Foreign Secretary said before Christmas, and what I have said today. The hon. Gentleman cannot have been listening to my speech.
As I was saying, the need for emergency aid has never been greater than in recent times. In 1993–94, we spent about £180 million on providing speedy and effective help for the victims of natural and man-made disasters. We provided help for the victims of 135 emergencies. We work together with the UN, other relief organisations, our partners in Europe and non-governmental organisations such as the British Red Cross and Oxfam. Whether it be the horn of Africa, refugees in Afghanistan or displaced


people from Azerbaijan, the ODA is there providing a continuous flow of emergency aid to help the victims of many emergencies.
Nor does ODA help stop at emergency aid, vital though that is. It is, for example, running a programme to restore basic electricity supplies to central Bosnia; ODA engineers are repairing power stations and mending supply lines to provide local communities with electricity. Road engineers maintaining life—saving convoy routes, radio operators, fitters, telecommunications experts and logisticians, all paid for by British aid, are working with the UN throughout Bosnia and Croatia. That is work of which we can all be proud.
During the past four months, operations in Rwanda and Bosnia have been undertaken by the UN and a wide range of British NGOs using bilateral ODA funds now totalling respectively £33 million and £94 million. Last week we announced a further £2 million to promote the recovery of Rwanda. Including our share of EC aid, we have spent more than £62 million on the Rwandan crisis since last April. Long—term programmes also continue in northern Iraq, Angola, Mozambique and the horn of Africa.
Sadly, the Opposition have used today's debate to recycle the canard that our aid is in some way linked to arms sales. That is nonsense: there is no link between our aid programme and defence sales, and there never has been. It is absurd to suggest that our aid flows are in any way determined by prospects of such sales. All the 10 highest aid recipients are low—income countries, nine of them in Africa and Asia. A recent OECD report recognises that our aid focuses on poorer countries, and acknowledges its quality.
The United Kingdom",
says the OECD,

has a highly concessional business—like bilateral programme largely directed towards the poorest developing countries. Its role as a major donor has been particularly important in several geographical areas, notably Sub—Saharan Africa and Asia, and in key sectors such as education, agricultural research, health and population and private enterprise. The United Kingdom has many prominent institutions in the development field and an enormous amount of expertise".
That is the reality of the UK aid programme—aid that works to reduce poverty world wide, promoting sustainable and lasting development. It has helped, and continues to help, to change the world for the better.
Fifteen years ago there was bitter war in Zimbabwe; equally unresolved was the struggle for Namibia's independence, while civil wars scarred Mozambique and Angola and, of course, South Africa lived under the shadow of apartheid. Now only Angola's future remains in doubt, and there too an end to the conflict seems in sight. In all those countries, and in some 150 developing countries around the world, UK aid has been and continues to be a catalyst for change for the better. There is nothing inevitable about countries' having to be poor, and every reason to believe that it is possible for us—and others—to make a positive contribution to change. The Economist recently forecast that by the year 2020 what are now called developing countries will account for two thirds of world output and that as many as nine of the 15 biggest economies at that time will be from today's third world.
Whether it is helping to improve the distribution of bread in Moscow, supporting sustainable agriculture in Bangladesh, helping to fight malaria in Africa or the countless other programmes and projects supported and funded by the ODA, we are determined to maintain a substantial and effective aid programme to help to reduce poverty worldwide. It is work of which we can all be proud.

Legal Aid

Mr. John Marshall: I am pleased to share this moment of history with my hon. Friend the Minister. It is perhaps appropriate that you should be in the Chair, Madam Deputy Speaker, because you are a former history teacher. It is also a pleasure to follow the debate initiated by the hon. Member for Leicester, South (Mr. Marshall). When I was elected to this place I feared that I would get his mess bills and that he would get all my dinner invitations. The hon. Gentleman has obviously gone for his coffee break. I wonder what the odds are of two Members by the name of J. Marshall initiating these first two historic debates?
This is not the first time that I have shared a moment of history with the Minister because we were both elected to the European Parliament in 1979. However, the greatest moment of history that he and I shared was on 19 August 1953, when on our respective birthdays Mr. Dennis Compton swept England to victory in the fifth test match and we regained the Ashes. I have one advantage over the Minister because not only was I at the match to see Mr. Dennis Compton do that, but he was born in my constituency; and a week or two ago I took him back to see his old home and his old school.
I pay tribute to the noble Lord Mackay, the Lord Chancellor. The dream of every American is to move from the log cabin to the White House. Lord Mackay made just as distinguished a journey, from a railwayman's cottage in Sutherland to the job of a Law Officer and then Lord Chancellor. There are two kinds of Law Officers—distinguished politicians who happen to be lawyers and distinguished lawyers who happen to be supporters of a political party. Lord Mackay is very much a distinguished lawyer.
It was said in Scotland that, no matter which party had won the 1979 election, it would have asked him to be Lord Advocate. It is a tribute to him as an emigré Scot that when he was appointed Lord Chancellor of England in 1987 the appointment was greeted with a mere murmur of approval. One wonders how Scotland would have reacted if an Englishman had been appointed Lord Advocate in 1988. I suspect that there would not have been a murmur of approval: the Scottish advocates would have had something to say.

Mr. Charles Kennedy: I join in the hon. Gentleman's fulsome tribute to Lord Mackay, who is one of my constituents. However, to put the matter in another contemporary context, although he may well have been appointed by a Labour or a Conservative Government in 1979, his subsequent conversion seems to have been complete, because at the last two general elections he spoke against me at Conservative campaign meetings in the constituency.

Mr. Marshall: My only regret is that the noble Lord cannot vote in the constituency, other than in European elections when I am sure that he carries out his duty and votes for the right party.

Mr. Paul Boateng: To vote the right way is to vote Labour.

Mr. Marshall: The hon. Gentleman is misguided if he thinks that the Labour party has any chance in that Euro constituency. We know that he is an opponent—

Madam Deputy Speaker (Dame Janet Fookes): Order. What has this to do with legal aid?

Mr. Marshall: You might ask the hon. Gentleman who took me down that by road with his sedentary intervention, Madam Deputy Speaker.
It is appropriate that the task of reforming the legal aid system should fall to Lord Mackay who has a fine legal mind, the analytical mind of a mathematician, and who has the sense of compassion to be found in those with a deep religious background.
The legal aid system was designed on the simple premise that no one should be denied justice because he is poor. That is an excellent and noble sentiment but, unfortunately, the system no longer achieves its basic objective despite being the most generous system of legal aid in the western world. Its cost has risen dramatically. In 1979–80, the system cost £99 million. In 1984–85, the cost was £263.1 million and by 1993–94, it had risen to £1,210 million. In the current financial year, it is estimated that it will cost £1,333 million.
Since 1979–80, the cost of legal aid has more than quadrupled in real terms and has gone up by 1,248 per cent. in cash terms. No wonder the noble Lord Mackay said:
We must look to new solutions. I am open to new ideas on how we can meet our objectives more efficiently, more effectively and more cheaply.
Of course some people will cavil about the phrase "more cheaply" but I remind the House of two points. First, if we can produce a cheaper system it will be to the benefit of all litigants, not only to the benefit of the legal aid fund. Secondly, the resources devoted to legal aid could be better employed elsewhere. It is a chilling fact that the amount devoted to such aid would be sufficient to provide nursery school places for all three and four-year-olds.

Mr. Nick Hawkins: Does my hon. Friend agree that one of the most important reforms that the Lord Chancellor has said he will carry into effect is the withdrawal of legal aid which has scandalously been made available to extremely wealthy people? The only reason for those overseas nationals litigating in British courts is that our courts are convenient forums. Those people have vast assets and clearly should not qualify for British legal aid to the detriment of the British taxpayer. It is right that our noble Friend intends to correct that abuse.

Mr. Marshall: My hon. Friend anticipates my speech. Like him, I have read the consultation document "Legal Aid for the Apparently Wealthy". It is a valuable document, to which I shall turn later in the debate.

Mr. David Ashby: Does my hon. Friend agree that legal aid for the apparently wealthy is a mere pinprick compared with the amount of legal aid that has been granted? Was he present in the 1980s and 1990s when we enacted one piece of legislation after another, doubling the number of offences, the number of


courts and the amount of legal aid that has to be granted as a result? Does he agree that a large part of the legal aid budget is our fault? We are responsible for it.

Mr. Marshall: I am afraid that I must disagree with my hon. Friend. When one examines the growth of the fund—[Interruption.] I wonder how those who are following our proceedings at this historic moment regard the attitude of Opposition Front-Bench speakers who make sedentary and unintelligible interruptions.
The biggest item of growth in the legal aid fund is civil legal aid rather than criminal legal aid, so I must disagree with my hon. Friend. He may regard it as a mere pinprick that Mr. Ernest Saunders received £1.3 million in legal aid and that the Levitt case cost the taxpayer £2 million, but when people see Mr. Levitt quaffing champagne at Tottenham Hotspur and living in a home worth £750,000, they regard it not as a pinprick but as an obscenity. They believe that those sums are the resources of the taxpayer and that they could be used more efficiently and more sensibly elsewhere.

Mr. Ashby: I agree with my hon. Friend about that.

Mr. Marshall: I thank my hon. Friend for his agreement. I think that, for a Wednesday morning, the House is indulging in far too many sedentary interruptions and I shall now proceed with my speech.
The National Consumer Council has suggested various ways in which legal aid could be dealt with more cheaply. It suggests that greater use could be made of binding arbitration. That would be especially useful in matrimonial cases, which have been one of the causes of the great mushrooming in legal aid. The council also suggests the development of no win, no fee, legal services. Our noble Friend Lord Mackay suggested that idea during the recent reform of the legal profession.
The council suggests that no-fault compensation under the Road Traffic Acts would be a means of reducing the legal aid burden, and that we should promote low-cost legal services. As a consumer, one would like legal services to become less expensive not only for the legal aid fund but for the many other consumers of legal services.

Mr. Hawkins: My hon. Friend mentioned the explosion in matrimonial legal aid. I practised at the Bar for a number of years before I came to this place, and I did a lot of work as a family law barrister in particular. I noticed that there was large legal aid expenditure for people who would frequently come to court for domestic violence injunctions.
Although it is proper that legal aid should be available in such cases, the problem often was that the battered wife would obtain legal aid to bring a case, to obtain an injunction, perfectly properly, and to protect herself, but she would then allow the man responsible for the violence back into her house. The relationship would resume. There would then be another violent incident. I see that the hon. Member for Swansea, East (Mr. Anderson) nodding. He is familiar with the problem. The woman would return to court and there would be further legal aid expenditure.
Does my hon. Friend agree that it is important for legal aid to be limited to, at the most, no more than two applications to court, because so often, legal aid is wasted by repeated applications by the same parties in the same court?

Madam Deputy Speaker: Order. Before the hon. Member for Hendon, South (Mr. Marshall) resumes his speech, may I point out, as I have already said once this morning, that interventions should be brief.

Mr. Marshall: There is obviously merit in what my hon. Friend the Member for Blackpool, South (Mr. Hawkins) says.
The National Consumer Council suggested that there might be a development of the salaried sector. It pointed out that in Holland, 15 per cent. of legal aid is through the salaried sector rather than through private practice solicitors.
In the legal aid system, we must consider the need to make greater checks on applications. In a written answer on 24 October 1994, my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department told me that, in 1993–94, there were 413,728 claims for civil legal aid and 606,041 applications for criminal legal aid. In that financial year, the legal aid assessment office referred 15 cases for alleged fraudulent claims.
We are being asked to believe that, of the 606,041 rather benign individuals who made applications for criminal legal aid, only 15 would dare to give misleading, inaccurate information to the legal aid fund. I do not believe that, out of 1 million applicants, only 15 might have told the odd fib or two. It beggars belief.
A written answer given on 26 October 1994 by my hon. Friend the Parliamentary Secretary shows that there has been a growth in the number of high-cost trials. In 1990–91, there were only 94 legal aid cases costing the taxpayer more than £100,000. By 1993–94, there were 226 such cases. In the first half of the current financial year, there were 153 cases. Those include some of the cases that have caused the greatest concern to the taxpayer.
The fact that some cases can cost more than £100,000, and that some other cases may cost only £1,000 or £2,000, underlines the absurdity of a standard assessment of means under the legal aid system. Although one individual might be able to afford a case costing him £5,000, he might find it much more difficult to produce the readies for a case costing him £100,000.
Despite, or perhaps because of, the cost of the legal aid system, it is expensive, capricious and unfair to individuals. That is why the Lord Chancellor's attempts to reform the system have been widely welcomed. Nothing has received a greater welcome than the consultative document "Legal Aid for the Apparently Wealthy".
I referred earlier to the case of Mr. Roger Levitt, who enjoys a life style that was the envy of many people. He has a home in St. John's Wood. He quaffs champagne. [Interruption.] He is still very well represented in St John's Wood by my right hon. Friend the Member for


Westminster, North (Sir J. Wheeler). Mr. Levitt's life style is an insult to the investors who lost all their money in his organisation.

Mr. Boateng: The hon. Gentleman was only too anxious to share with us his judgment as to how the noble Lord Mackay voted at the previous election. Would he like to hazard a guess as to how Mr. Levitt voted?

Mr. Marshall: I made it clear that Lord Mackay did not vote at the previous election because, as a member of the House of Lords, he could not have done so.

Madam Deputy Speaker: I caution the hon. Gentleman about following the path set out by the hon. Member for Brent, South (Mr. Boateng).

Mr. Marshall: I was just going to say that I would not speculate as to how someone who did not live in my constituency voted, because I would not have any access to canvass returns that could give me any accurate information on the matter.
It is equally offensive to taxpayers and citizens when they see Mr. Ernest Saunders skiing with his wife in Switzerland and hopping across the Atlantic on Concorde, no doubt ready to patent the cause that managed to cure him of Alzheimer's disease. He enjoys a lifestyle that is far superior to that of the vast majority of taxpayers and hon. Members, yet he received £1.3 million in legal aid.
There is the case of Mr. Gordon Foxley, who is guilty of massive corruption at the Ministry of Defence. He netted a tidy sum, has a house worth £500,000 and a fleet of cars. He has managed to sting the taxpayer twice, first as a civil servant and then as a defendant in a case. We also have the case of Mr. Hashim, who received £4 million in legal aid, despite being a multi-millionaire.
Legal aid was designed to help the indigent defend themselves. Instead, it is being misused by a number of asset-rich individuals, who have been able to cover up the source of their luxurious life style and to sponge off the taxpayer. I am sure that all hon. Members would like to congratulate our noble Friend Lord Mackay on his determination to remove that scandal.
Lord Mackay's consultation paper contained five questions. First, should there be a limit to the amount of equity ignored for means-testing purposes and should that limit be set at £100,000 for private houses? Secondly, should there be a ceiling on the amount that can be ignored as the subject of dispute and, if so, would a figure of £100,000 be appropriate? Thirdly, should the legal aid rules be changed to allow the existence of a Mareva injunction to be ignored? Fourthly, should more be done to develop the concept of legal aid as a loan when the applicant is unsuccessful in his litigation? Finally, should there be an affluent life style provision in the civil legal aid scheme?
Most people believe that there should be a limit on the amount of equity to be ignored when it involves a private home. Most ordinary taxpayers do not enjoy an equity of £100,000 in their homes, so why should they pay taxes to finance the legal costs of those who live in very much better homes? I also believe that there should be a similar disregard in respect of the assets which are the subject of debate. I suppose that a Mareva injunction would be known as the Hashim clause. It is applied only when

someone leads a wealthy life style and has substantial assets. It gives great offence to people that Mr. Jawad Hashim should have receive £4 million in legal aid when he was a multi-millionaire, had seven homes and expensive cars, and managed to employ servants.

Mr. Anthony Steen: Does my hon. Friend agree that it is not only the very rich who should be considered in the review but the poor? If the poor receive legal aid as a matter of right, it could distort the outcome of a case for the defendant.

Mr. Marshall: With that very short question, my hon. Friend has curtailed my speech by about four minutes, which will no doubt please the House.
I agree that, in civil legal aid, which is the most expensive aspect of legal aid at the moment, the existence of a legal aid certificate is the strongest weapon that a litigant can have because those against whom he is litigating know that, whether they win or lose the argument, they will pay the costs.
The principle whereby, when a case is lost, the legal fund pays nothing towards the costs of the person being sued needs to be re-examined. That is unfair and leads to delays. I am told that the best way to win a civil case is to have a legal aid certificate and that the second-best way of winning is to have a good argument. We have read recently that Mr. Winston Silcott is to receive £100,000 of legal aid to sue the Metropolitan police. Many people, including the Metropolitan police, regard that as thoroughly offensive.
The Lord Chancellor's fourth question was whether legal aid should sometimes be regarded as a loan. Mr. Ernest Saunders told the press that he is shortly to receive a £70,000 pension from Guinness. He also receives substantial fees for lecturing and giving marketing advice but chooses not to pay anything towards his legal aid costs which, I remind the House, were £1,342,465—not a penny more, not a penny less. In such cases, the unsuccessful criminal who then comes into money should be expected to pay something towards his past legal aid fees.
I deal now with the question of an affluent life style and what could in future be called the Roger Levitt clause in legal aid. Everyone believes that those who enjoy an affluent life style should not receive legal aid.

Mr. Ashby: Does not my hon. Friend believe that someone acquitted on appeal should receive costs, or does he believe that people who are wrongly convicted should always pay into the legal aid fund and always lose out? I am thinking about Roger Levitt in particular.

Mr. Marshall: It is up to the courts to decide whether someone who has been acquitted should receive costs. It is not right to say that everyone who is acquitted should receive costs, because there might have been good reason for the prosecution. It may well be that the old Scottish verdict of "not proven" should be introduced in some cases. Were that to happen, the person involved might not receive costs. It would be wrong to say automatically that people who are prosecuted should not pay anything towards their defence.

Mr. Steen: rose—

The Parliamentary Secretary, Lord Chancellor's Department (Mr. John M. Taylor): rose�ž

Mr. Marshall: I think that I should give way first to my hon. Friend the Minister.

Mr. Steen: So do I.

Mr. Taylor: I am grateful to my hon. Friends the Members for Hendon, South (Mr. Marshall) and for South Hams (Mr. Steen) for their courtesy. In his admirable speech, my hon. Friend the Member for Hendon, South has already dealt with the five questions set out on page 35 of the document entitled "Legal Aid for the Apparently Wealthy". Would he be good enough to consider—not necessarily this morning but when he has had time to reflect further—the many other questions contained elsewhere in the document, because I would value his opinion on them, too?

Mr. Marshall: If I tried to answer every question in the document, I should have to take up the whole of the debate. I do not know whether my hon. Friend the Minister was intervening because he thought that he might not have the opportunity to do so later.

Mr. Steen: My hon. Friend .the Member for Hendon, South (Mr. Marshall) has touched on legal aid in criminal cases. Does he agree that, too often, legal aid is offered as of right to people charged with criminal offences? Does he agree that that should not be so and that the most stringent means test should be applied to those who have been charged with such offences, as happens with civil matters? Does he further agree that too much money is being spent on legal aid and that the problem needs to be dealt with?

Mr. Marshall: I thought that I dealt with the latter point at the beginning of my speech when I said that there had been a huge increase in the legal aid bill from under £100 million in 1979–80 to £1.3 billion in the current financial year. On my hon. Friend's first point, he is right to say that legal aid should not be given as a right. The merit of the case should be examined.
Having spoken to various lawyers over the past few weeks, I have learnt that many believe that legal aid is given in cases which are not as legally meritorious as others in which it is not given. I could cite a number of such cases involving people who come to my constituency surgery—their adversary has been awarded legal aid but they feel that the case did not merit it. I shall cite only two examples because this issue is taking my speech out of sequence, although that will reduce its length.
One constituent told me that he had been given planning permission by Barnet council to build a garage. He had bought the bricks and wood but then a neighbour said that such a garage would interfere with his light. The neighbour approached the legal aid fund and received backing. This created inequality, because the person who had received planning permission could not get legal aid and could not afford to fight his case. The legal aid fund, in effect, determined the outcome by backing one individual when the other could not afford to fight the case.
On another occasion, representatives of a Hindu temple came to see me. They had expelled someone who had broken an agreement. Had he apologised, they would have

taken him back. However, he decided not to apologise but to go to court with help from the legal aid fund. It was not a meritorious case—an apology, which would have cost nothing but the loss of face, was not offered so expensive legal action was taken with only one side benefiting from legal aid. It is unfair, and a waste of taxpayers' money that could have been used elsewhere.

Mr. Hawkins: There are so many people in the category that my hon. Friend has just mentioned that they now have their own acronym—MINELA: modest income, not eligible for legal aid. Those people are now in the weakest position in the whole legal service.

Mr. Marshall: My hon. Friend is quite right. On one occasion, I was described by one of the chaps who compiles the parliamentary profiles, Mr. Andrew Roth, as a man of patience. I hope that I have demonstrated that patience by the number of times that I have given way this morning.
The Lord Chancellor said in his document that an affluent life style was difficult to define. It may be difficult to define, but we can certainly recognise it in the life style of Mr. Hashim with his seven houses, in Mr. Foxley with his £500,000 mansion, in Mr. Levitt with his £750,000 home, and in Mr. Kenneth Sinar—with his yacht Enendine, which had six berths, three cabins and four occasional berths—who lived in millionaires' row in Hove.
Those life styles are the envy of the ordinary citizen, who cannot afford luxury yachts, champagne in boxes at White Hart lane or a fleet of motor cars. It is quite wrong that the ordinary citizen, who cannot afford that life style, should have to pay taxes so that someone else can continue to afford it. Our noble Friend Lord Mackay is to be congratulated on seeking to release those resources so that they can be used to help those in real need. I shall not speak at great length about civil legal aid because I dealt, in various answers to my hon. Friend the Member for South Hams (Mr. Steen), with the issues that concern me, concern him and concern the House.
The objective of legal aid, when it was set up in 1948, was that no one should be denied justice because of their income. That is no longer true because those who can afford justice in the courts today are the very wealthy and those who are legally aided. A huge swathe of middle England cannot afford justice.

Mr. Donald Anderson: And middle Scotland.

Mr. Marshall: And middle Scotland.
That is due not to a defect in the legal aid system but to the cost of the legal system in general. That is why I welcome the appointment of Lord Woolf, whom the Government have asked to try to reduce the cost of the legal system. Lord Woolf has to look at three points: the costs involved in legal action, the delays involved in legal action, because justice delayed is justice denied, and whether some cases could be removed from the legal system altogether.

Mr. Steen: There is one more point to mention, if my hon. Friend would allow me. We should also consider the fees charged by lawyers. If the fees that lawyers charge were pegged, the legal aid fund would not have to pay


out so much money. It is similar with doctors, who charge whatever they like, knowing that private insurance will pay.

Mr. Marshall: .I see that I am equidistant between my hon. and learned Friend the Member for Leicestershire, North-West (Mr. Ashby) and my hon. Friend the Member for South Hams. One is obviously a consumer and the other a provider of legal services. I shall not dare to decide who gets the better deal.

Mr. Steen: On a point of order, Madam Deputy Speaker. May I acquaint the House with the fact that I am learned, as well as our hon. Friend the Member for Leicestershire, North-West (Mr. Ashby)?

Mr. Marshall: I regard my hon. Friend the Member for South Hams as learned in many matters.
I also welcome the fact that Lord Justice Taylor is reported in the press this morning as trying to make lawyers less wordy. He says that cases would be determined more quickly and less expensively for all litigants and the legal aid fund if that were so.
Legal aid was designed to ensure that no one was denied justice because of their income. That was an excellent concept in 1948. It was an inexpensive concept in 1979, but today it is a very expensive concept, which is being abused by some individuals. However, the misuse by a minority is not an excuse for destroying the system, but an argument for reforming the system. That is why I welcome the consultative document and the Lord Chancellor's positive and penetrative proposals.
The original objective of legal aid has been destroyed because many people today are denied justice. As I said earlier, only the wealthy and the legally aided can afford to enjoy justice in our courts. That is why I welcome the determination of the Lord Chancellor to reduce the cost of our legal services, why I welcome the appointment of Lord Woolf and why I welcome the reported comments of Lord Justice Taylors.

Mr. Piers Merchant: I am grateful to have an opportunity to speak in a Wednesday morning debate in the House. I have often spoken elsewhere at such a time, but I never had the pleasure of speaking here. I shall begin by congratulating my hon. Friend the Member for Hendon, South (Mr. Marshall) on an extremely lucid description of his concerns, with which I identify. There are, of course, many people who would see things differently. I have spoken to those outside this House who have complained that far from it being the case that the amount being spent on legal aid is generous, a great deal more should be spent. I add that those people—normally—are practising in law and perhaps, therefore, are personally involved.
In answer to such people, a strong case could be made for the success of legal aid based on the amount of funding that has been made available. If one considers the latest available figures—I obtained them from the House of Commons Library yesterday—it is immediately apparent that, for example, civil legal aid in general has increased by a huge percentage; about 1,000 per cent. since 1979. The total increase, comparing last year with

1979, is in the order of 400 per cent. after adjusting for inflation. Without that adjustment, that 400 per cent. figure becomes 1,122 per cent.
The increases are apparent not only over the period between 1979 and 1993, but over the most recent years. My hon. Friend the Member for Hendon, South quoted more figures which support that charge. In addition, the number of bills paid for legal aid show a huge increase. Civil legal aid bills increased from 104,804 in 1979–80 to 359,188 in 1993–94. For magistrates, the number of bills paid for criminal cases rose from just over 243,000 to 432,000. All those figures show that there has been a massive increase in public funding for legal aid.
I said that those figures could be used as an argument for the success of legal aid over that period, but I would not take that view. I would use those figures to illustrate that something has gone seriously wrong. There has been an excessive increase in the funding of legal aid and it should be curtailed. I do not in any sense question that it is true that many individuals have been helped over that period, and rightly so, but to concede that there should be continued increases in legal aid is effectively to concede an argument in favour of an entirely socialised legal system; it would be to say that one should increase funding of the system by a ratchet effect until everybody effectively had the right to claim some money if they wished to take legal action. I would totally oppose that.
I agree with my hon. Friend the Member for South Hams (Mr. Steen) that legal aid, in itself, is a distortion of the system and that, by giving grants to people to litigate, we are giving them a potential advantage over others. I, too, have had constituency cases which clearly demonstrate that. People were persuaded to create litigation because they knew that there would be no possible loss to themselves as the funding would be provided by the state. Others have faced either serious delays or considerable distortions to their legal cases because of the intervention of the legal aid fund on behalf of the other party. Some of those cases have involved people who, earlier in their lives, could very well have afforded to fund their own legal action. I shall return to that point later.
Clearly it is fundamentally wrong for the taxpayer to be expected to write a blank cheque to fund unlimited private action, and especially to subsidise people with a wealthy lifestyle. There is ample evidence that that happens, and although I do not want to go over again the ground so ably covered by my hon. Friend the Member for Hendon, South, I shall refer to two cases that my hon. Friend mentioned.
Dr. Jawad Hashim received £4 million in legal aid—an outrageous payment. A former president of the Arab Monetary Fund, he was being sued for £33 million, which he had allegedly siphoned into private Swiss bank accounts, and he owned six luxury homes around the world. Eventually he was ordered to pay £132 million in compensation. There was no question, at any stage, of that man being poor or even remotely understanding what poverty is, yet he could claim from the British legal aid fund. That is so unacceptable that action must be taken as a matter of urgency to prevent any recurrence of such a case.

Mr. Steen: My hon. Friend raises an interesting point. Has he considered whether legal aid will be available to all European Union citizens? Will any Frenchman or


Dutchman who comes here be entitled to legal aid, too, and if so, will inquiries be made about the circumstances of such people in their own countries? Might that not be another way in which Europeans can take money from the British taxpayer?

Mr. Merchant: That is an important consideration. In his consultation document "Legal Aid for the Apparently Wealthy", the Lord Chancellor asked to what extent nationality should be taken into account in deciding whether to grant legal aid. That is an important topic to examine, and there is a strong argument that the taxpayers of this country should not be expected to fund the legal bills of those who are not British nationals yet who might for one reason or another appear in the British courts. Such people may have chosen to appear there, and be taking action themselves. In a number of such cases—perhaps in all of them—it is no longer suitable, right or fair that people should receive support from the taxpayer.
The other case that I wish to mention is that of Mr. Roger Levitt—another glaring example of misuse of the legal aid fund. Mr. Levitt received £3.7 million to fight fraud charges, yet continued to live what was clearly a luxurious life style. I accept that those are unusual cases—they are by no means run-of-the-mill uses of the legal aid fund, and thank goodness for that—but that does not make them any more justifiable, nor reduce the need to correct the abuse.
In the light of such cases and of other information, the Lord Chancellor last month produced a Green Paper, in which he asked some excellent questions and made some excellent suggestions. I draw the attention of the House especially to what he says about the affluent life style. That may be a difficult concept to define, but it is an important one because it has to do with equity and credibility, and with another more important factor that we are here to act upon—the views of ordinary members of the public, who feel outraged when they see their taxes siphoned off to support people who live a special life style, out of the reach of their world.
Not only should current affluent life style be taken into account, but some means should be found to examine past affluent lifestyle. I know that that is a difficult subject, but there is a considerable difference between someone who has always had a limited life style and income, and someone else who has been financially successful throughout his life and has amassed a large fortune and lived in great style, probably operating in the business world, but who for one reason or another has now fallen on financial hard times. We all know of people who, according to their bank balance, have fallen on hard times, but who still have access to funds both at present and, more particularly, in the future—especially if they have the skills required to deal in the world of finance and business.
If such people apply to the legal aid fund, it should be asked whether it is reasonable to expect them to have made plans beforehand to protect themselves against the cost of future legal action. I am thinking of insurance, or perhaps organising of their finances, especially if they were operating in the world of business, to take account of possible future legal action. Such people may have worked in a business sector in which legal action was a common phenomenon, and a reasonable business man planning his future carefully in the business world should have put aside funds for possible litigation.
It is also relevant to consider whether the subject matter of a dispute should be taken into account, especially where capital is at stake in the legal action. At present that capital is excluded from the formula, but should it be taken into account? I feel strongly that it should, and I also support the idea of a cap to limit the allowable value of a property and size of a mortgage.
There is much more to be said on the subject, but this is a brief debate, so I do not want to delay the House further. I finish simply by drawing the attention of the House to the many possible alternative ways to help those who need to take legal action that obviate the need for the taxpayer to provide a subsidy through the legal aid fund. Such methods could help those who are, in the jargon, "apparently wealthy", as well as those in the middle income bracket who would not at present be entitled to legal aid, and those who, legitimately and understandably, are now entitled.
One such method is the no win, no fee, arrangement, which represents a positive step forward in our legal history and gives us hope for the future. It would enable individuals to sue and to take other action without any risk to them, yet with the possibility of gaining compensation or other redress at no cost to the taxpayer.
I strongly support the drive to achieve a cheaper legal system for the consumer, via the courts or via alternative means. I also support an extension of standard fees, which could help towards that objective, and the encouragement of other administrative processes—there are now many of those—as an alternative to legal action. Legal action should be a weapon of last resort, not of first resort, for the ordinary citizen. There should be, and are, other means by which redress can sensibly be achieved.
I should like strong action to be taken to make the appeals system cheaper. Many parts of that system can be very expensive, and we must try to ease the passage of those with a genuine cause for grievance against a lower court, without involving huge costs to them or to the taxpayer.
We need stricter targeting, further and better checks on applications, and the elimination of abuse and fraud, whether that be abuse that is permissible at present under some of the strange twists in the legislation, or fraud that is not permissible but is not being cracked down upon sufficiently. Specifically, I urge the development of alternative ways of obtaining redress. Those developments constitute the answer that should enable us not only to restrain the growth in the cost of legal aid but to reduce that cost. That, and not the reverse, is what I would regard as a success.

12.18

Mr. Mark Robinson: I too am glad to be taking part in the first of our Wednesday morning debates. In the great world outside it may be commented upon that our Chamber is a little sparsely attended, but we are here as Back Benchers to debate subjects of close personal interest to us. I therefore congratulate my hon. Friend the Member for Hendon, South (Mr. Marshall) for securing us a debate on legal aid today.
The workings of legal aid services, as they are at present, remain a mystery to the general public unless and until they find that they are forced to use them. The general perception—at least of constituents who visit me


in my advice surgeries—is that the service has been underfunded and cut. Perhaps that is because people remember the publicity that was given in 1993 to the tightening of the eligibility conditions. That produced an outcry at the time, but it is worth reflecting on the reality of the costings today, as my hon. Friends said.
The legal aid scheme cost £685 million in 1990–91, as the Lord Chancellor noted recently, and this year the cost is increasing to £1,300 million, even with tightening of eligibility conditions—a doubling of expenditure in three financial years. That, by any standards, raises questions about good use of public money. We must ask ourselves how cost-effective that service is. If the general public knew the rate of escalating cost and what they receive in return, they would be much angrier and more stirred up about the subject than they are. What is more, unless we do something, the trend is likely to continue upward.
I was grateful for the chance to read the keynote speech about the future of legal aid given by the Lord Chancellor on Wednesday 11 January 1994, at a seminar organised by the Social Market Foundation. That was a fundamental think-piece and discussion of the way that we might consider trying to change the legal aid system.
The general public may believe that the number of people helped by legal aid is declining, but under the scheme it has actually increased from 3.5 million to 4.5 million. Nevertheless, it is not uncommon for Members of Parliament such as myself to be visited by constituents who have tried to take up a legal grievance—especially through the civil courts—and who find that they are unable to do so because they fall, sometimes just an inch, outside the eligibility criteria.
Those people become extremely cross when they hear about the examples that were quoted this morning. They do not understand how people of such great wealth can obtain access to the legal aid system with such enormous sums yet, when they themselves are fighting what to them are important cases but may appear to other people to be small matters, they are unable to obtain legal aid. All that adds up to a general opinion that the legal aid system is not serving the public as well as it should.
That forces one to ask how a service based on such fast-growing expenditure can be so poorly regarded. We should probably seek the answers in the inflexibility of the present court-based system, at least as it applies to civil cases, and the remorseless increase of the cost of each individual case, leading to a commonly held opinion that the cost of civil justice is climbing beyond the reach of individual people.

Mr. Ashby: Has my hon. Friend considered that, in respect of civil justice, the responsibility for the increase lies fairly and squarely at the Lord Chancellor's door, and at the door of the Lord Chief Justice, who have introduced, as recently this year, rules that have increased the cost of court proceedings enormously? I have suffered. I have had to pay up as a result of stupid rules that have been inserted, requiring replies that previously were never necessary, which have increased the costs of cases enormously. The Lord Chancellor and the Lord Chief Justice are responsible for the increase themselves.

Mr. Robinson: My hon. Friend makes a valuable argument, because there are two sides to the equation—

the increasing costs of legal aid and the cost of the court system. The latter subject alone would be worthy of a debate on another occasion, but unfortunately I do not have the time to develop that theme this morning.
However, for all the reasons that I have given, I warmly welcome the Lord Chancellor's decision to publish his consultation paper, and also to ask Lord Woolf to carry out a review of the procedures of the civil courts. I hope that Lord Woolf will bear in mind some of the arguments that were made by my hon. Friend the Member for Hendon, South. In addition, some interesting ideas for fundamental reform of the legal aid system were proposed in the speech that I mentioned.
The legal aid system as we know it today emerged from the Legal Aid and Advice Act 1949, which set up the civil legal aid scheme that is very much the basis for that which exists today. It has been rather like a train that starts with two carriages, to which carriage after carriage has been added, so that it becomes progressively slower.
Assistance was introduced under the green form scheme, which was introduced in the 1970s, and the duty solicitor schemes of the 1980s. However, the essential approach is on a case-by-case basis.
The Lord Chancellor rightly asked the question—I think a good one—whether there are more cost-effective ways of achieving results, at least in the early stages of civil cases, so that they do not necessarily have to come to court. Simplification is one example.
I find the six objectives that the speech spells out especially interesting. There is no time to discuss all of them this morning. There is a need to recognise and incorporate the contributions that can be made by legal agencies and advice services, such as local law centres. Citizens advice bureaux do valuable work, but many are short of funds. They could greatly expand their work if the opportunity came to them through the legal aid system.
In selecting that specific proposal from the many that the Lord Chancellor has suggested for discussion, I urge my hon. Friend the Minister, when he replies—

Mr. Donald Anderson: Is not the hon. Gentleman aware of some contradiction between the wish to expand the work provided to the public by citizens advice bureaux and the financial difficulties of those bureaux throughout the country as a result of the pressures on local government?

Mr. Robinson: I think that that is a different issue. I am discussing the suggestion that we give citizens advice bureaux a new and expanded role, which would need to be separately funded. The other funding issues should be tackled, but there are different ways to tackle them. That is why I shall follow with great interest the pilot project that the Legal Aid Board has established to encourage the delivery of legally aided services by non-solicitor agencies.
The other aspects of the Lord Chancellor's speech that interest me are, first, better targeting of those in greatest need and, secondly, improved quality and efficiency. I know that attempts have been made to achieve that by means of the courts charter, but a case has come to my attention in my constituency, Roxborough v. Poffley, in which there was almost unjustifiable and outrageous delay in the court proceedings—so much so that the judge involved wrote privately to criticise the way that the delay developed.
I have written to the Minister about that case, and he has had the courtesy to reply. However, I find it extraordinary that, after all the work that went into the courts charter, it does not cover listing, because it is considered judicial rather than administrative.
The Lord Chancellor has a chance to put his house in order. The courts provide a service to the public, and that service needs to be more responsive to the public to help cut delays. I should be interested to carry out an analysis of the cases that have been mentioned this morning to find out what proportion of the high costs in those cases was due to delay, whether reasonable or contrived.
We must use the opportunity to find ways to improve the legal aid system, so that it once again gives the taxpayer value for money and makes him feel that it provides a valuable service. That is not the case now, which is why I have given such a warm welcome to the Lord Chancellor's excellent speech earlier this month.

Mr. Paul Boateng: We owe the hon. Member for Hendon, South (Mr. Marshall) a debt of gratitude for enabling us to discuss legal aid and legal services this morning. It is right that the topic—all too often neglected in the Chamber—should find its place on the fist Wednesday morning sitting. For that, we owe the hon. Gentleman a debt of gratitude.
During the debate we have heard a litany—a veritable rogues' gallery has been paraded before us by Conservative Members—of people who have abused the legal aid system. We heard of Mr. Levitt, Mr. Hashim and Mr. Saunders. Strangely, given the litany of rogues, one name was missing: the name of Mr. Asil Nadir. I wonder how that name came to be missed—

Mr. Ashby: I would have mentioned him if I had been called.

Mr. Boateng: I hear from one independent spirit on the Conservative Benches that, had he been given the opportunity, he would have mentioned Mr. Nadir. It is so often the case with Conservative Members that they are just about to mention Mr. Asil Nadir, that well-known contributor—

Madam Deputy Speaker: Order. I must caution the House that, if my recollection is correct, the case is not concluded. It may be in indefinite suspension, but I think that it is still around.

Mr. Boateng: We shall be suitably cautioned, Madam Deputy Speaker, and will not pursue that matter further. Who knows—the legal aid cornucopia involving that individual may yet begin to flow.
But the serious point is that we would be most unwise to fashion a policy on legal aid and legal services based on those particular individuals, their experiences and abuse of the system. We need a more rational and coherent approach. I have listened to the contributions of hon. Members this morning and it may well be that, in fashioning that approach, it is possible to achieve some agreement on the basic principles.
There is one critical principle on which we must all agree if we are to fashion a legal aid system and legal services that are capable of meeting the interests of justice. It is vital that a system of legal aid and legal services for which the taxpayers of this country pay

should be able to deliver legal aid, advice and assistance, and where necessary representation, to many more of those taxpayers than is currently the case.
The scandal of legal aid is the way in which, in civil matters, unless someone is in receipt of income support, he can forget public assistance when pursuing a just, reasonable and meritorious claim. It cannot be right that people who work, but are of modest means and contribute to the cost of the service through direct and indirect taxation, should effectively be excluded from access to justice.

Mr. Ashby: I am sorry that both I and the hon. Gentleman—who would, I am sure, like to declare an interest—have been deprived of a fee this morning. The hon. Gentleman will have heard my interventions on the way in which we are responsible for the increase in legal aid. I am sure that he will agree with that in terms of both civil and criminal matters.
Does he also agree that we are having a debate on the increased cost of legal aid without considering one aspect—we have an extremely good form of justice and legal service, which is dirt cheap? It is not an expensive service when compared with those of other countries and what they deliver.

Mr. Boateng: I am afraid that I must beg to differ. What the hon. Gentleman has to say smacks of complacency, which is unacceptable to the Opposition. I do not believe in doing down our system, but we must face the fact that it has become bloated and inadequate in terms of being able to meet the challenges of the end of the 20th century. We need to reform it in quite radical ways if it is to meet the needs of the times and deliver access to justice.

Mr. Ashby: Will the hon. Gentleman give way?

Mr. Boateng: I regret that I am unable to give way again.

Mr. Ashby: The hon. Gentleman has misunderstood.

Mr. Boateng: It is the fate of politicians to be misunderstood from time to time—I fear that that has affected the hon. Member for Leicestershire, North-West (Mr. Ashby) this morning.
We must recognise the importance of reforming the legal aid system in a way that is consistent with, and carried out at the same time as, our reform of the practices and procedures of the law. We must also reform the way in which the professions and their practices and procedures are structured. An element of restrictive practice remains in the organisation of the legal profession which requires reform.
We welcome the work of Lord Justice Woolf, but there is an urgent need to reform the procedures of the civil justice system. We need to minimise delay and unnecessary replication of tasks. We must ensure that the focus is always on moving forward litigation when it is inevitable, but avoiding it when it can be avoided.
Inadequate attention is paid to mediation and alternatives to law, particularly family law, which swallows one third of the civil legal aid budget. That attention needs to be paid not, I hasten to add, as part of a Treasury-inspired cost-cutting exercise—although it is an effective way of reducing costs—but as a way of delivering a better, more cost-efficient and effective


service to consumers of legal services. The time has come to put the consumer of legal services first and to recognise that consumers are losing at the moment.
I shall give one example of the way in which the legal aid system is currently failing to meet the needs of those who deserve advice, assistance and representation. Mr. Vincent Oliver came to see me. The Legal Aid board found that he had proper cause for action in a claim for compensation against St. Mary's hospital for an operation in which his voice box was mistakenly removed.
That is a terrible trauma in itself but, worse than that, this man has no savings or disposable capital and he does not enjoy a grand life style—there is nothing to mark him as being anything other than an ordinary bloke. He receives benefits to the sum of £343 per month, and he is being asked to contribute £44.80 towards the cost of his legal aid. He is incapable of paying that sum without considerably reducing what is already a very modest standard of living. That cannot be right.
What about those people who are denied legal aid altogether—those people who have saved a little extra, or pensioners who have worked hard and saved all their lives but are now denied access to legal aid advice and services? That cannot be right;. the system needs urgent attention.
That is why I ask the Minister, in the context of this short debate, to consider how he intends to address the issue of the under-spend in the current legal aid budget. The Minister will be aware of the Lord Chancellor's commitment to reviewing the issue of eligibility for legal aid if there is an underspend in the total legal aid budget. Last year, there was an underspend of some £70 million, and it is predicted that this year the sum will rise to more than £90 million.
We recognise the need to keep a tight control on the budget, but if that is the case we must find a way of utilising some of that money to meet the needs of the many deserving people who are currently legally unrepresented and unassisted. There is scope for using that money effectively and I urge the Minister to give an assurance that the underspend will be used to meet the needs of those deserving people who, because of the changes in legal aid eligibility, are currently denied access to legal services.
By all means, have a debate about the delivery of legal services, but that debate should not be led by what are essentially Treasury considerations rather than the interests of justice. Let us put justice and the consumer first and see how we can best deliver justice to people who are currently denied it.

The Parliamentary Secretary, Lord Chancellor's Department (Mr. John M. Taylor): Until a few moments ago, I thought that the adversarial approach which is always present in litigation had drained out of politics this morning. However, I am reassured that it is business as usual.
I thank my hon. Friend the Member for Hendon, South (Mr. Marshall) for not only securing this historic debate on our first Wednesday morning sitting but deploying his case in an extremely impressive manner, taking many hon. Members on this side of the House with him.
I congratulate my hon. Friend the Member for Somerton and Frome (Mr. Robinson) on his very thoughtful contribution to the debate. I particularly single out his remarks about the citizens advice bureau. I think that it plays a tremendously important and unheralded role, and I take humble pride in the fact that I helped to establish a citizens advice bureau some 22 years ago. I think that that organisation's worth in society is under-regarded.
My hon. Friend the Member for Beckenham (Mr. Merchant) made a very lucid and urgent speech, with periodic interventions from my hon. Friends the Members for Blackpool, South (Mr. Hawkins), for South Hams (Mr. Steen) and for Leicestershire, North-West (Mr. Ashby).
Most of what the hon. Member for Brent, South (Mr. Boateng) said was very convincing, and he made a valuable contribution to the debate. I turn to his last point with which he wanted me to deal. Legal aid is demand-led and, as such, it is almost impossible to plan for. However, we have endeavoured to forecast, as best we can, in one of the fastest growing and erratic areas of public expenditure.
What the hon. Gentleman calls an "underspend" is actually 7 per cent. more than we spent last year. I think that Government Members will urge me to be careful when discussing what temporarily appears to be an increase of 7 per cent over last year. I do not wish to get involved in an incautious, over-rapid response to performance over a relatively limited period of time.

Mr. Ashby: In talking about a 7 per cent. increase in expenditure over last year, we should bear in mind that the recent changes in the rules of the High Court have meant an increase in the cost of litigation of about 30 per cent. The rules of the High Court need to be looked at.

Mr. Taylor: The House will not be surprised to learn that by far the highest single component in the increasing cost of legal aid is lawyers' bills. My hon. Friend the Member for Leicestershire, North-West will know how long-winded lawyers can be. We should do everything we can to expedite litigation or find alternatives to it.
I turn now to some other points, not least the consultation paper issued by my noble and learned Friend the Lord Chancellor, which contains a chapter dealing with the subject of legal aid for foreign nationals. The Lord Chancellor and I recognise that this issue raises strong feelings. We would welcome views on whether the Government are correct in their present view that it would not be right to impose nationality restrictions on the availability of criminal or civil legal aid.
On the increasing cost of legal aid, it is useful to say that the number of people being helped is increasing. In 1993–94 therewere 3.5 million legal aid acts of assistance and just over £1.2 billion was spent. By 1997–98, we expect the number of people helped by the scheme to rise to about 4.5 million and the cost of the scheme to rise to more than £1.6 billion. We estimate that approximately half of households are currently eligible for civil legal aid on income grounds.

Mr. Hawkins: Does my hon. Friend agree that, as our hon. Friend the Member for Hendon, South said in opening the debate, there is scope for checking more carefully people's eligibility for legal aid? If those who


are claiming legal aid fraudulently are weeded out of the system, it will ensure that more funds are available for those in genuine need.

Mr. Taylor: I am not sure that that question needs an answer: it is self-evident that we should take care to check that people qualify for legal aid, not least in a world full of trickery—a point which my hon. Friend the Member for Hendon, South made rather well. He wondered whether the small proportion of people who were ultimately prosecuted represented all those who were putting their best foot forward, or perhaps doing something slightly more dishonest than that.
On the inequality between legally aided and non-legally aided parties, there are circumstances in which a successful non-legally aided defendant may seek costs against the Legal Aid Board or the legally aided opponent. The restrictions on those circumstances may seem harsh in some cases, but they establish a compromise between protecting those who would otherwise suffer financially and protecting public funds.
Legal aid is granted after both means and merits tests in civil cases. The merits test is designed to rule out cases deemed to be frivolous. I am unable to comment on individual cases, but we should not forget that what might appear relatively frivolous to someone who is not directly involved may be a matter of the first importance to the parties immediately concerned. The Legal Aid Board is responsible for deciding on the merits of the case in civil legal aid, and it takes its duties very seriously in that respect.
It may be helpful to the House in response to the points raised by my hon. Friends if I take a little time to describe the proposals on possible changes to legal aid that the Lord Chancellor set out in his speech to the Social Market Foundation on 11 January 1995 to which my hon. Friend the Member for Somerton and Frome referred in his excellent remarks.
The Lord Chancellor is considering a number of possible new initiatives. He has said that they are only the preliminary ideas. We appreciate that there is a lot of work to be done to put flesh on the bones of a reformed legal aid scheme. The Lord Chancellor and I would welcome views on the proposals.
The basis of the legal aid scheme as it exists today is that help should be provided to those falling within the qualifying limits. Up until now, that help has generally been provided in the same way since the inception of the scheme—by the private legal profession, funded on a case-by-case basis.
The legal aid scheme cost £685 million in 1990–91. In the current financial year, the cost will exceed £1.3 billion—an increase of more than 7 per cent. over 1993–94. That represents a rate of increase much faster than inflation. Unfortunately, the rise in the cost of the scheme is not only because of the greater numbers helped: far too much of the rise is attributable to an increase in the cost per case; at the same time, many people who need legal aid are excluded from it.
As has been made clear by the debate today and by previous discussions in the House and elsewhere, although the legal aid scheme is one of the fastest growing Government expenditure programmes, it is also increasingly under attack from a variety of directions.

Therefore, the Lord Chancellor and I have concluded that radical change is needed. The hon. Member for Brent, South said as much as well.
The purpose of the Lord Chancellor's proposals is to establish a better, more efficient, more responsive and more flexible legal aid scheme. The overall cost of legal aid must be affordable and controllable. What is needed is a system which forces those who are providing advice and assistance to assess and reassess frequently whether what they are doing is providing value for money both for the client and for the taxpayer.
It is the Lord Chancellor's intention that a future legal aid scheme should operate under a cash limit. That will provide a discipline for the provision of a quality service, and will contain incentives for suppliers constantly to improve the quality of the service. Such a sense of discipline has been sadly lacking up to now.
It is true, as the Lord Chancellor has made clear, that some cases may not be brought under the new scheme that are being brought now. In practice, however, a cash limit is more likely to mean that more people are helped, in more deserving cases, as priority will be set on the basis of need and effectiveness.
The Lord Chancellor has made it clear that most of what he said about his ideas for future of legal aid on 11 January related to the advice and assistance and civil proceedings. In the light of the distinction between civil and criminal legal aid, we shall need to think carefully about how those ideas might apply to criminal legal aid.
We shall, of course, be considering carefully whether to consider the separation of budgets for different areas of legal aid—or ring fencing, as it is called—so that the risk of one area swallowing up another may be avoided.
The Lord Chancellor proposed that the future legal aid scheme should operate by a system of block contracts. The idea would be that the Legal Aid Board should contract for the provision of services with a range of suppliers. Each legal aid area would have a budget for the provision of a full range of publicly funded legal services. Suppliers would be contracted to supply advice, assistance and representation within their competence. Where it was necessary to refer a case on because the original supplier did not have the requisite skills, it would be to suppliers who had made arrangements with the Legal Aid Board to do such work.
The use of block contracting will enable the board to operate within a cash limit and to set priorities. It is a way to bring alternative suppliers into the provision of legal services. As the Lord Chancellor has said, very valuable work is being done by, for example, law centres, citizens advice bureaux and other advice agencies.
It has long been the Lord Chancellor's wish to see them brought into greater use within the legal aid scheme. The opportunity provided by a reformed scheme to build on the Legal Aid Board's non-solicitor agency franchising pilot project, and extend the involvement of advice agencies will be welcomed by us all.
As hon. Members will be aware, the current legal aid scheme is heavily biased towards certain proceedings and court-based solutions. The reform of the scheme should allow the Lord Chancellor to encourage different ways of resolving problems, using not only advice agencies but also mediation and arbitration, where appropriate.
It has been suggested in some quarters that a cash limit will lead to the money running out towards the end of the year. Frankly, that is scaremongering. Whatever contractual arrangements are devised, we shall need to ensure that there are mechanisms to guard against unreasonableness.
The elimination of waste in the system—that is, waste of time in court proceedings or in waiting for court proceedings—is a priority for the Lord Chancellor and myself. Lord Woolf's current review of the procedure of the civil courts, referred to by many hon. Members this morning, will help in that matter, but the problem of legal aid cannot be solved simply by tackling waste in the system.
The Lord Chancellor and I understand the concerns expressed about the current scheme. We intend to establish a system that enables to us set priorities for legal aid more effectively according to need, to weigh the benefits against the costs, to break down the present lawyer-led system in a way which encourages a variety of providers and different ways of doing the work and to encourage early advice and different ways of resolving problems, and thus reduce the need for litigation.
The points raised by hon. Members today will contribute to our thinking, and I thank my hon. Friend the Member for Hendon, South for initiating the debate.
On perhaps a slightly lighter note, in the context of an essentially very serious subject, not least to the many people involved, unwillingly and unenthusiastically perhaps, in appearing before law courts—I have met few litigants who have enjoyed the experience of appearing before a law court-1 dare say that, although there are challenges for advocates in the courts, and that challenge may be enjoyable in a way—from time to time, I have enjoyed it—to be a litigant and to be a party is daunting. To be involved in such proceedings with only limited resources is even more daunting. It is frightening wondering whether one has the means to meet the costs.
The first English statute providing for legal aid dates back to 1495—it did not all begin in the 1940s. In the reign of Henry VII, provision was made for the representation of poor people in courts of law. The only trouble was—here is an echo of the same problem we face today—that Act did not attempt to define a poor person.

York Carriage Works

1 pm

Mr. Hugh Bayley: Trains have been built at York carriage works for 150 years, and rail engineering underpins the local economy. The York works are not a smokestack industry from the past. Asea Brown Boveri, which owns the works, has invested £50 million in York in the past four or five years in buildings, machinery, technology and training. The York factory is the most modern of its kind in Europe and produces the only trains that meet the full European crash-worthiness certification. Despite that investment and those achievements, however, time is running out for the York works.
In the course of the past year, ABB has shed 900 of its 1,600 work force, and 10 days ago the company chairman said that he had only eight weeks left to secure a further order—and that if he did not succeed the corporate board in Zurich would have to decide to close York because a factory employing 700 people cannot be kept open if there is no work.
Are the Government saying that Britain can afford to throw away an industry and a plant as important as York just because the British Railways Board has in its wisdom decided to defer for two or three years placing an order for badly needed replacement trains? The ABB board in Zurich finds the Government's attitude utterly incomprehensible. That foreign company bought a chunk of the British Rail system and invested £50 million in York and a further £50 million in the Derby carriage works; yet it is being told that that investment must be written off. What kind of advertisement is that for inward investment or for the Government's rail privatisation policies?
York is currently building the first 64 of 600 class 465 carriages promised to commuters on the Kent coast lines. That stock is to be delivered later this year—three months ahead of the agreed date, which says something for the York works. Everyone expected the contract to roll forward to a second tranche. The existing contract has a follow-on clause, which would not have been included in the contract if British Rail, the Department of Transport, the Treasury and the company had not expected a further order to be placed.
The former Minister for Public Transport, the right hon. Member for Kettering (Mr. Freeman), said last year that he expected to receive British Rail's business case for a follow-on order last June and to be able to finalise an agreement with full Treasury and Department of Transport approval by September.
Just two weeks ago, however, everything was thrown into confusion. The British Railways Board announced a delay of four or five years until 1999 in any further orders for Networkers for Kent coast lines. The board said also that it did not intend to trigger the follow-on clause and felt that any future order would have to be subject to Europe-wide competition. If that happened, even if ABB were to win the contract, the York works would have closed before retendering was concluded.
The British Railways Board says that the reason for delaying is that there is no business case for ordering more stock at present, but that is not the view of Richard Fearn, director of South East Trains—the part of British Rail


which operates the service. In a letter last December to the hon. Member for Beckenham (Mr. Merchant), who was in his place a moment ago, Mr. Fearn said:
I am currently working hard with colleagues in the Department of Transport to try to secure a much larger build so that we can fully replace our old trains on Kent Coast over the next two to three years.
The view that there was no business case for further stock was not shared either by the right hon. Member for Kettering last May, when he said at the York Rail Forum:
There is a prima facie case for Kent coastal rolling stock.
The Central Rail Users Consultative Committee says that the average passenger loading on Kent coast trains in the morning peak is 2.6 per cent. higher than that permitted on safety grounds and that the overloading factor almost doubled in the past year. The Capital Transport Campaign produced figures this morning showing that the overloading factor on some trains is as much as 27 per cent. above the maximum allowed, including both seated and standing passengers.
No one claims that those ancient, overcrowded slum trains are fit for the purpose of carrying Kent coast passengers. They are history on wheels. In reply to a written question published in Hansard today, the Minister for Railways and Roads informed me that 424 out of 792 carriages on the Kent coast line date from 1959. Those carriages have been in continuous service longer than all but three Members of the House. They are clapped out and should be chucked out—I refer of course to the carriages, not to the hon. Members.
New trains would provide a better, cleaner, safer, quicker, more comfortable and more reliable service, and would divert traffic from road to rail. The introduction of new trains built at York on the Chiltern line increased the number of passengers by 40 per cent. immediately after they were introduced. If the Government are serious about shifting traffic from roads on to the railways on environmental grounds, the rolling stock replacement should go ahead.

Mr. Harry Barnes: My hon. Friend made the point that the ABB situation applies to Derby as well as to York. At a time when investment is required, there is investment blight because the Government's privatisation plans mean that planned development cannot occur. My hon. Friend made a powerful point in respect of the provision that should be made for public transport. Derby is very much involved in the debate.

Mr. Bayley: My hon. Friend makes an important point. I am aware that he and others of my hon. Friends representing Derbyshire constituencies have been campaigning hard for orders to ensure a future for the Derby carriage works. The whole country needs an investment plan that will sustain its railway manufacturing base.
New trains for the Kent coast lines would save fuel because their running costs are much lower; they would reduce maintenance costs and they would free space on Kent coast lines which is needed to provide access for Eurostar channel tunnel services until the new link is constructed.
There are also the safety considerations. The Hidden report into the Clapham junction crash stated that all slam-door carriages of 1950s vintage used by British Rail had to be either strengthened or scrapped by 1999: it did

not state that they all had to remain in service until 1999, which seems to be the decision that the British Railways Board has taken.

Mr. Stanley Orme: I know that my hon. Friend is aware of early-day motion 404, which has been signed by 48 Members who are sponsored by the engineering union. I happen to be chairman of that union, the Amalgamated Engineering and Electrical Union. We are all concerned about the loss of manufacturing skills. The closure of the works would be a blow to York and to British industry generally. I hope that my hon. Friend will continue the campaign that he has led so magnificently. We must fight to achieve reversal of a policy that is based on privatisation and not on providing what is needed by the country.

Mr. Bayley: I am most grateful for my right hon. Friend's intervention and for the support that I have received from my hon. Friends on the Front and Back Benches. I know that my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) has been lobbying hard, and there are suppliers to the York works in his constituency.

Mr. Elliot Morley: Will my hon. Friend give way?

Mr. Bayley: In view of the time, I must say no to my hon. Friend. I thank him, however, for the support that he has given. Indeed, there has been support from hon. Members on both sides of the House. The hon. Member for Ryedale (Mr. Greenway) has supported the campaign. I know that hon. Members representing Kent constituencies have done so as well. There has been support throughout the country. I have received dozens of letters from people expressing concern about the threat to the York works. I have also had support from the EU's new Commissioner with responsibility for transport, who has taken a close interest in what has been happening.
I am not trying to score a party political point. Common sense says that the works should be saved, as does public opinion. Successive Conservative Ministers have said that the full fleet of Kent coast trains would be replaced and the present Minister has spoken to me on many occasions in the past two weeks since British Rail made its unfortunate announcement. Given the commitment of previous Transport Ministers, both to rail manufacturing and to maintaining that base, and to providing replacement carriages for Kent coast passengers, what will the present Minister do to ensure that a follow-on order is placed with the York works before the deadline, which is only eight weeks away? If no order is placed in the next eight weeks, the works will close.

Sir Roger Moate: I congratulate the hon. Member for York (Mr. Bayley) on securing this debate at such a crucial time and on the campaign that he has fought, together with my hon. Friend the Member for Ryedale (Mr. Greenway), whom he generously mentioned, to save the York works. I thank the hon. Gentleman for allowing me a few minutes to speak on behalf of the population of Kent and of all Members representing Kent constituencies, who make common cause with him on the campaign to secure an early order so that there can be a continuation of the Networker express construction programme.
I agree with the hon. Gentleman that this is not a party issue. It is common sense that we want to keep the production lines open at York. It is common sense also that we should not be deterred from placing an order for new rolling stock merely because, even by British Rail's admission, there is a time problem of a year or two.
I endorse all that the hon. Gentleman has said about the need for new rolling stock in Kent. In case there is any misunderstanding—there should not be—I emphasise that 16 new four-car units will be delivered for the north Kent service this year. They are coming ahead of schedule. There will be high-profile new trains on the network in the autumn timetable. They are just a start. They will whet the appetite of all Kent commuters, who will want more new trains. The 16 were always seen as just a start.
To be fair, there was not a firm contract arranged for the follow-on order. There was a clear understanding, however, that we were at the beginning of a continuous process to replace the Kent rolling stock. I pay credit to Network SouthEast. In good faith, it has always expected that there would be a follow-on order. It came as a surprise to us, therefore, when we heard that British Rail felt that it could not continue the negotiations.
Kent Members had a meeting with the chief executive of British Rail. It is on record that he said that the door is still open for negotiation, and we would all be shocked if earnest and serious negotiations did not follow to ensure that a way is found of placing the follow-on order for much-needed rolling stock. The existing rolling stock will be time-life expired in the next three to four years. It would be stupid indeed not to place a new order now, merely for the sake of a dispute about perhaps a couple of years, at the end of which the present rolling stock will be even less safe than it is now. It will be clapped out and breaking down.
We also need new rolling stock for jobs in Kent. It is needed as much in Kent as the York works needs to build it. Kent is happy to make common cause. Now it is for British Rail seriously to put together a business case to submit to the Minister. I should be extremely disappointed if my hon. Friend were to say that a good business case put by ABB to British Rail and by British Rail to the Minister was not likely to receive endorsement. I think that it is the will of the House that we should get on with replacement and have first-class rolling stock in Kent and for rail passengers everywhere.

The Minister for Railways and Roads (Mr. John Watts): I congratulate the hon. Member for York (Mr. Bayley) on securing a debate at such a civilised hour and on presenting his case in such a civilised and well reasoned way. I pay tribute to his efforts and to those of my hon. Friend the Member for Ryedale (Mr. Greenway) and my right hon. Friend the Member for Selby (Mr. Alison) on behalf of York and those of their constituents who are employed by ABB.
I acknowledge the crucial importance of railway employment in York. I congratulate ABB and its work force on the efficiency improvements that have been achieved at York and at other sites since privatisation, with the benefit of the substantial investment to which the hon. Gentleman referred.
Given the age profile of the rolling stock fleet and the long life span of the stock, orders are cyclical, as was exemplified by the substantial orders—they were still under construction—for Networker trains to replace Kent inner suburban trains. It was inevitable that there would be a downturn in orders following that peak. The long-term replacement need is below the recent rate of new build.

Mr. Morley: I understand what the Minister says about the cyclical nature of orders, but the long-term investment and planning of companies such as ABB, for which my constituency is a major supplier, means that they find it difficult to switch on and off. It would be much better for rail commuters and manufacturing industry to have long-term orders.

Mr. Watts: Indeed. I recognise that it is desirable for us to have a vibrant railway manufacturing industry and, if it can be achieved, a less cyclical pattern of investment.
The downturn in commuting into London since the peak of 1989–90 has compounded the problem. In the late 1980s, it seemed that the Network SouthEast fleet would need to be expanded to meet growing demand. Instead, we have experienced a decline related to the recent recession. That has hit British Rail passenger revenue extremely hard. We expect to see some growth as recovery takes hold, but we cannot be certain when rail commuting will return to the peak of 1989.
British Rail's estimates of rolling stock requirements in the 1980s were made in good faith, as were any related comments made by my predecessors, my right hon. Friends the Members for Enfield, Southgate (Mr. Portillo) and for Kettering (Mr. Freeman). With hindsight, it is clear how commercial demand for new trains has changed since the 1980s.
The Government would welcome a further BR leasing deal following the current £150 million contract with ABB for Networker trains, subject to two points. First, there must be a commercial need for new rolling stock and a good business case for it. British Rail cannot scrap sound and serviceable trains prematurely. Those are matters of judgment. I have no intention of going further in commenting on the sound and serviceable nature of
trains, because to do so would be inviting hon. Members, particularly my hon. Friends from Kent, to seek to lynch me or have me certified under the Mental Health Act 1983.

Mr. Jacques Arnold: Should not British Rail take into account what its passengers think about its carriages, and also the commercial consideration that, if passengers do not think much of its carriages and switch to the coaches which run from Kent to London every day, its revenues will suffer. British Rail should take that into consideration.

Mr. Watts: My hon. Friend is right. I am sure that one of the features of the privatised railway industry will be a much greater responsiveness to the needs of passengers.
Those must be matters of judgment for British Rail. The Government cannot generate that commercial need or second-guess BR's judgment, although my right hon. and hon. Friends are free to do so.
Secondly, the financial terms offered by the private sector for financing the acquisition of trains must be acceptable as a long-term lease. Transfer of risk is


paramount here. A "genuine and substantial" proportion of risk must be taken by the lessor. It is not possible to lay down mechanistic rules, because of the complexity and subjectivity of the issue, but residual value risk is considered to be pre-eminent.
The previous £150 million leasing deal did not satisfy private finance initiative guidelines, but was approved exceptionally as a step towards developing a rolling stock leasing industry. Any subsequent deal will need to go much further on risk transfer. The industry has always been fully aware of that position and the Department is ready to do whatever it can to clarify the PH rules and to assist in configuring the deal, for which there is a good business case to fit within those rules. I have given that undertaking on many occasions, both in the House and in discussions outside.
The Government are committed to privatising the rolling stock leasing companies during the course of this year, but at present it is British Rail's responsibility, as owner both of the RoSCos and of the operating companies, to assess the business requirements for new trains. There is therefore no question, as the hon. Member for Derbyshire, .North-East (Mr. Barnes) suggested, of privatisation being responsible for the present position on orders. Uncertainty is not a factor. If there is a good commercial case and acceptable leasing terms, I am sure that the legal structure of ownership need not be an obstacle.
In making that assessment, BR looks at such factors as the capital cost of the trains, the projected cost of maintenance and any revenue to be gained from greater speed or reliability—points to which some of my hon. Friends have referred. It also looks carefully at the comparative cost of maintaining existing units. This is not a theoretical exercise, but one based on detailed experience of the condition and current repair cycles of components.

Mr. James Couchman: When the rolling stock is passed over to the companies later this year, will the work and analysis that BR has done on the proposal to provide new trains on the Kent coast route be passed over to the leasing company?

Mr. Watts: I am sure that the work and the knowledge that has gone into the assessment of rolling stock requirements will not be lost when the RoSCos are privatised.
As we know, British Rail reached a decision not to exercise the option offered by ABB for replacement trains for Kent coast services. BR concluded that the current fleet could continue in service until 1999, when substantial expenditure on heavy engineering costs would have been required to keep the trains in service. That conclusion is clearly unwelcome news to many commuters and to many of my hon. Friends, but BR has a duty to look at the matter on a commercial basis.
Following the recent meeting between BR and hon. Members representing constituencies in Kent, however, BR indicated that it would wish to re-examine the commercial case if an improved offered were received from ABB. If BR then concludes that the negotiated deal represents good value for money, it would come to the Department with a case under the private finance initiative, and I give an undertaking to look at any such case urgently with my right hon. Friends both within the Department and elsewhere.
BR's recent decision not to exercise the option is not due to a lack of Government funding. BR rejected the proposal based on its assessment of the commercial need for trains. The November Budget settlement had no role to play in that judgment.

Mrs. Gwyneth Dunwoody: Tell us another fairy story.

Mr. Watts: The hon. Lady may like fairy stories, but I am trying to give the House the facts as they are.
British Rail has invested £4 billion in new rolling stock since 1979. Almost 4,000 new vehicles and locomotives have entered service in the past 10 years. In the former Network SouthEast area alone, more than 1,600 new vehicles have been delivered since 1986 for various lines. Overall support for the railways provides this year for investment of about £1 billion.

Mr. Michael Alison: Will my hon. Friend bear in mind that if the issue is to be looked at again in 1999 or thereabouts and ABB has gone out of operation, the lack of competition in carriage production will mean that it may cost BR a lot more than it would if it went for the order now?

Mr. Watts: My right hon. Friend makes an important point which reinforces what I said earlier about the desirability of maintaining a vibrant manufacturing industry.
The hon. Member for York raised important questions about the safety of the remaining mark I electrical multiple units on former Network SouthEast services. It is an acknowledged fact that modern rolling stock designed with integral bodies has greater collision resistance than the older mark I stock. The same is true of developments in other modes of transport.
As regards day to day service, condition rather than age is the critical factor. All rolling stock is subject to a rigorous inspection and maintenance regime. Mark I rolling stock is fit for purpose in spite of its age. Rolling stock would not be put into service by BR if it was not fit for purpose.
I shall now deal with the specific recommendations in the reports on the Clapham and Cannon street accidents. Appendix G of Sir Anthony Hidden's report recognised:
The inventory of Mark I coaching stock is large, and much of it has not reached an end of its economic life, nor will do so by another decade or more.
The report went on to say,
it could be forcibly argued that there are more rewarding candidates for large capital investment in the railway than would be incurred by early replacement of these vehicles.
Sir Anthony Hidden did, however, recommend that British Rail
shall carry out its stated programme of research into the structural integrity of its rolling stock within its planned timescale of completion by April 1991.
Recommendation 55 went on to say:
On completion of the programme BR shall discuss its conclusions with the Railway Inspectorate and obtain their agreement to the structural changes necessary to strengthen all relevant rolling stock with a subsequent lifespan of eight years and over.
In April 1991, BR concluded that it would not be reasonably practicable to carry out structural changes to mark I vehicles. I understand that the Health and Safety Executive's railway inspectorate agreed with BR's conclusions.
The decision to replace the rolling stock involved in the Cannon street accident had already been taken by BR at the time that the inspector's report was published. I understand that the replacement programme for Kent link trains should be completed this April, when all the older trains will have been withdrawn on that route.
Turning again to Kent coast services, I recognise the urgency of the issue for ABB Transportation. BR is continuing discussions with ABB on a modified proposal. I am keeping closely in touch with developments and will continue to maintain close contact with my right hon. Friend the Member for Selby, my hon. Friend the Member for Ryedale and the hon. Member for York as matters develop. I think that we have had constructive discussions as the matter has developed, and I offer an undertaking to keep in touch with the right hon. and hon. Members concerned.
We are ready to help with the private finance aspects of any proposal that BR might submit to the Government. We are considering with British Rail how best to deal with that component. We do, of course, have recent experience of how a rolling stock deal can be fitted within the rules of the PFI, because we have recently concluded the agreement for the supply of Northern line trains for London Underground within the terms of the PFI.
This is not uncharted territory. There is a pattern, there are ground rules and there is experience on which we can draw. More immediately, however, it is for British Rail to decide whether there is an acceptable proposal which meets its business requirements, and it is for ABB to decide whether it can offer such a deal. If it can offer British Rail a deal that it cannot afford to refuse, with the help of my Department it should be possible to fit it within the rules of the PFI. I hope that the interests of both York and Kent can then be better served.

Mr. Nigel Dedman

Mr. Iain Duncan Smith: I rise today knowing full well that this is the first day of individual debates under the Jopling reforms. I must say, as a small aside, that I was no great supporter of the Jopling reforms and I remain somewhat cynical and sceptical about them. None the less, I am happy to have the opportunity to raise a particular issue of grave concern.
I am also grateful and happy to see my hon. Friend the Minister of State, Home Office, the Member for Penrith and The Border (Mr. Maclean) on the Front Bench. He has a great sense of justice and a concern that people should be treated fairly. I urge him to retain his usual talents in that regard, as I lay out the case before him.
I make no apology for the fact that the debate is peculiar in that it is about one particular individual, a constituent of mine. It may seem strange that I should have gone to the lengths of applying for a debate, but the case has wider ramifications. There are probably many other Mr. Dedmans throughout the country who suffer much the same sort of problem. I hope that they will be given some heart by my raising the matter. The case is fairly complicated, so again I make no apology for walking hon. Members through it slowly and in some detail.
On the night of 7 July 1992, the police were called to a boatyard at Point Clear, St. Osyth, Essex at the request of the yard owner. On arrival, they spoke to a Mr. Brown who claimed to be the owner of a boat called the Five Pennies. Mr. Brown produced three documents relating to the boat—a letter from the Metropolitan police about the theft of the boat, a witness order to attend the trial of a Mr. Lewis who was charged with the theft of the proceeds of the boat and a photograph of Mr. Brown with the boat.
Despite the fact that Mr. Dedman was known at the time to be the owner of the boat by the boatyard and had been so certainly for an established period, no one thought to contact him to counter the claim that a new owner had arrived on the scene.
The police officers looked at the documents and talked to the man and then gave their permission for the boat to be taken away. Mr. Dedman has believed for some time, and I suspect that he is right, that the police should have been much more suspicious about the time at which the individual chose to arrive at the boatyard and the fact that he at no stage urged them to contact Mr. Dedman to establish his claim. They should have been more cynical and, at the very least, made sure that the boat was impounded rather than allowing it to be handed over.
The problem is that the police officers clearly gave credence to Mr. Brown's story, and the security guards at the boatyard then bowed before them. A statement was taken from Mr. Brown and documents were photocopied, but he was allowed to take the boat away, and that is where the complications start. It was only the following day that Mr. Dedman was told about the removal—I say theft—of his boat, well after the individual had been and gone, at which stage he had no redress.
As I have said, at no time was Mr. Dedman contacted by the police, or by anyone for that matter, before the boatyard contacted him to tell him that his boat had gone. To put the matter in another context, I cannot imagine that, if the police were called to an incident concerning


an important object of transport such as a car, they would never have assumed that someone else was the owner. They would have sought to check, using the numberplate, who was the licensed owner and to discover the correct procedure. Yet here the procedures seem to have collapsed and the police were happy to let the boat go.
Mr. Dedman contacted the police about the boat and was told by the officer concerned at the time that he had been satisfied from the documentation that Mr. Brown was the legal owner. I find that immensely strange because I have always understood the police to be cynical about getting involved in such cases, and that if they are sucked into them, they seek to make sure that they understand both sides of a case before pronouncing any opinion on a matter. Even then, they would be more likely to be reticent about giving approval. Yet here, approval seems to have been given, which carried huge weight.
It was subsequently proved that Mr. Brown was not the owner of the boat and knew so at the time of taking the boat from the boatyard. The Essex police then claimed that they could not have prevented it from being removed, yet they had been involved. Mr. Dedman discovered that the boat had been involved in a number of court disputes before he became its owner.
Mr. Dedman then sought redress through the courts. He sought redress against the police for their actions, but was told by the judge at Southwark Crown court that there was no case against the police. On 12 October 1993, the presiding judge dismissed Mr. Dedman's claim against the first defendant, Mr. Simkins, from whom he bought the boat in 1990, and his claim against the third defendant, the Essex police. Mr. Dedman was ordered to pay the costs of the Essex police and told to recover his costs from the second defendant, Mr. Brown. However, Mr. Brown was declared bankrupt on 16 March 1993.
All Mr. Dedman's efforts to obtain further information about the witness order addressed to Mr. Brown regarding the Lewis case, which Mr. Brown produced to the police on 7 July, have been unsuccessful. Therefore, Mr. Dedman has been unable to find out what Mr. Brown's involvement was in the case. The police and the courts have seemed unable, if not unwilling, to assist him.
So far, I have described many of the events that have led to Mr. Dedman's predicament. Now Mr. Dedman finds that he has to pay not only his own legal costs of £3,000 or more, but he is being hounded by the Essex county council's legal department for their costs of some £3,000. To top it all, our great judicial system leaves Mr. Dedman still without the boat of which he can prove ownership. On many occasions, Mr. Dedman has requested the police to impound the boat, so that once the matter is clarified he can take possession of it, but the police have refused to become further involved in the matter.
It is a remarkable position. Mr. Dedman seems to be being treated as though he has committed a crime. His crime, it appears, was to be stupid enough to own a boat of which somebody else decided that he should no longer have possession. It could be a comedy, were there not the personal tragedy in the middle of it that Mr. Dedman finds himself subject to injustice when he had expected .a just outcome.
I became involved in the case when Mr. Dedman came to me as a final and last resort, explaining that he did not know where to turn. He was being hounded for money, which he had great difficulty in finding. He had no boat

to offset against the costs should he be forced to pay them because he could not take possession of it. It seemed that no one wanted to listen to him. In other words, he was a little man whose case no one wanted to resolve.
I took up the matter with the Essex police and it struck me that they wanted the matter dead and buried, but I suppose that that is no surprise. Superintendent Cotgrove wrote to Mr. Dedman saying:
While the actions of Mr. Brown can clearly be shown to be shabby, it is the likelihood of proving dishonesty at the time of the offence that is relevant in the case of theft … I do have sympathy for the situation you find yourself in through no fault of your own in the light of the criminal law. Where that does not apply then, the police have no powers to prevent the removal of property.
In many senses that misses the real point. The police were present at the time and it was their involvement then that had a powerful influence on the case.
Superintendent Cotgrove continued:
Having read the documents, the officer was certain that in 1989, Mr. Brown was the owner and therefore he could not stop him from taking the boat away, unless he had reasonable grounds for suspecting an arrestable offence was about to be or had been committed by Mr. Brown.
Why did no one contact Mr. Dedman?
The attitude seems to have been that perhaps there had been a small mistake or problem, but, "For God's sake let us clear it out of the way and shut up shop. Mr. Dedman will have to sort out his own problems. Perhaps we should not have become involved, but it is not our fault." No one thought to contact the legal owner of the boat. I find that one failing remarkable: having chosen to be involved and to give their opinion, the police did not even bother to find out whether the legal owner disputed the change of ownership.
I took the matter up with my right hon. and learned Friend the Home Secretary and with the Lord Chancellor. Their letters to me expressed sympathy, but made it clear that they could do nothing to assist Mr. Dedman. I am fully aware of that. I brought the matter to their attention as much because I felt that there was a problem in the operations of the police and the courts if such a problem could arise as because I wished to resolve Mr. Dedman's individual difficulty.
The age-old concept of justice not only having to be done but having to be seen to be done cannot be sufficient if cases such as this arise. It is clear that Mr. Dedman has not been treated fairly. It seems far more important that justice can sometimes be interpreted as "having your day in court", that is good enough; case dismissed. This case is really more about right being done through the legal procedures, which has not happened.
I seek the advice of my hon. Friend the Minister. What can my constituent do? I suspect that my hon. Friend will find it as hard as I do to say where we go from here; the options are clearly limited. There are several possibilities, however. The public may ask why on earth the police and others are not co-operating to try to resolve the issue, rather than shutting the door on Mr. Dedman: there must be a way of resolving it.
The case may seem petty, but it is not. If Members of Parliament have a purpose, it is surely to make certain that the Mr. Dedmans of this world are not crushed by the system. The system clearly could not care less what happened that night; it seems that those involved merely wish to bury the case as fast as possible—and, if necessary, to bury Mr. Dedman with it. Does my hon.


Friend agree that there is a case to answer? If only those involved had learnt to co-operate, the issue might well have been resolved at an early stage. I urge my hon. Friend to act, or at least to advise me.

The Minister of State, Home Office (Mr. David Maclean): I thank my hon. Friend the Member for Chingford (Mr. Duncan Smith) for raising an important matter concerning what he believes to have been an injustice. He mentioned the Jopling rules. My right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) is my neighbour in Cumbria; while some of us greatly appreciate the benefits of the Jopling rules governing Thursday evenings, those benefits will sometimes be offset by the inconvenience of having to cancel Wednesday morning appointments.
I assure my hon. Friend the Member for Chingford that I appreciate the anger and frustration that his constituent must feel. I am not a boating enthusiast—I get rather scared on any boat smaller than the QE2 with full stabilisers, not that we can afford to travel on the QE2 on our parliamentary salaries. It is said, however, that there are two happy days in the life of a boat owner: the day he buys his boat, and the day he sells it. I do not know about that, but I am sure that my hon. Friend's constituent rues the day on which he bought the Five Pennies. Some might feel that there is an irony in that name, in view of how much the purchase has cost him. I assure him, however, that he has the House's sympathy in what has been a most unfortunate case.
My hon. Friend explained in some detail how his constituent has been left without his boat and with legal bills amounting to some £4,000, and I do not think that there is any dispute about those facts. It may be useful if I summarise the events that led to the case coming before the House; in doing so, I shall draw particularly on the judgment of His Honour Judge Simpson, who presided over the civil action brought by my hon. Friend's constituent.
In 1990, Mr. Dedman bought a motor boat and took it to a boatyard in St. Osyth, in Essex. The boatyard was a secure compound, and about 20 boats were kept there on trailers. Between September 1990 and 1992, Mr. Dedman and his brother used the boat on most Sundays during the season, but all that changed on 7 July 1992, when a Mr. Brown took the boat from the yard.
As my hon. Friend has explained, Mr. Brown was the previous owner of the boat; but he had sold it, using a third party as agent. The boat was properly sold, and a good title eventually came to the Dedman brothers. However, the third party who acted as agent did not pass on the sale price to Mr. Brown, and as a result the agent was later charged with the offence of theft and appeared at Snaresbrook Crown court.
Mr. Brown, however, thought that his boat had been stolen, and His Honour Judge Simpson specifically said that he could not be criticised for that. Mr. Brown saw the boat at the St. Osyth yard and announced his intention to tow it away, whereupon the manager of the yard called the police.
A Police Constable Summerfield answered the call and arrived at the boatyard. Mr. Brown showed him three documents, one of which was a letter from the

Metropolitan police dated 4 December. Unfortunately, the letter referred to the theft of the boat rather than to the theft of the proceeds. The mistake was important: if the boat had been stolen, under the Sale of Goods Act 1979 Mr. Dedman would not have had good title to the boat, and Mr. Brown would have been fully entitled to do as he did and take it away.
The judge accepted that PC Summerfield did not know of the inaccuracy in the Metropolitan police report. PC Summerfield did not get in touch with Mr. Dedman at the time because he was called away to investigate a burglary, but he contacted Mr. Dedman the next day and told him what had happened.

Mr. Duncan Smith: I accept that the police constable was called away. Surely, however—having felt some sympathy with Mr. Brown and, perhaps, established in his own mind that Mr. Brown was the boat's owner—he should logically have said that the boat could not be removed until he had confirmed Mr. Brown's ownership by talking to Mr. Dedman and seeing what documents he produced. Surely it was wrong for the police constable to make such a judgment—rushed or otherwise—at the time.

Mr. Maclean: Police officers are not judges in civil disputes; they are not civil arbiters. They must make a judgment about whether a crime is being committed, has been committed or is about to be committed. Was this likely to be a theft, or was a theft about to take place? The police constable formed the view that a crime had not been committed and was not about to be committed, and it was not up to him subsequently to determine the validity of the civil case. I shall say more about that shortly.
My hon. Friend's constituent later sued Mr. Brown, the person from whom he had bought the boat. He also sued the police. The case was heard at Southwark Crown court in October 1993; Mr. Brown did not appear to defend himself, and an interlocutory judgment was entered. Mr. Dedman, however, was unsuccessful in obtaining compensation from Mr. Brown, who claimed to have sold the boat and was declared bankrupt.
I think that the House will accept, as I do, that my hon. Friend's constituent has had a very raw deal. Unfortunately, that sometimes happens. Where I must part company with my hon. Friend is in his belief that his constituent's misfortunes are the fault of the police. In coming to that conclusion, I am not making a personal judgment in my capacity as a Minister: I am relying on the judgment of the courts.
As my hon. Friend is aware, the investigation of crime, the action and decisions which are taken by police officers in the course of their duties are operational matters. They are the responsibility of the chief officer of the force concerned, and Ministers have no authority to intervene. Therefore, it would not be right for me to comment on the way in which an individual operational case was handled.
As the House is aware, my hon. Friend's constituent brought a civil action against the chief constable of Essex and, as I have mentioned, the court dismissed the case. I think it might be useful if I read from Judge Simpson's judgment. It is a long quote but it is useful to put it on the record as my hon. Friend will wish to be aware of it. The judge said:
PC Summerfield himself told me that he examined the boat, read the documents, took a statement from Mr. Brown who was adamant that he would take the boat unless he could be given some reason why he should not. Having read the document, PC


Summerfield felt 100 per cent. certain that, in 1989, Mr. Brown was the owner, and that he could not stop him from taking the boat away. PC Summerfield explained the powers that he had as a police officer and said he could not restrain Mr. Brown unless he had reasonable grounds for suspecting an arrestable offence was about to be committed. He did not give permission or encouragement and could not stop him. The officer cannot be criticised merely because he read the document and had no powers to stop Mr. Brown. In those circumstances I have no hesitation in saying that the action against the Chief Constable of Essex was misconceived. They had no powers to prevent Mr. Brown and no permission or encouragement was given, the action is dismissed as against the third defendant.
My hon. Friend has also criticised the police for failing to prosecute Mr. Brown. As my hon. Friend is aware, a file was passed to the Crown Prosecution Service, which decided that there was insufficient evidence to show that Mr. Brown had acted with dishonest intent. Therefore, no action was taken against him.
The decision whether to prosecute rests entirely with the Crown Prosecution Service and not with the police. The police's involvement in the decision on whether to proceed ends when the file leaves their hands and is passed to the CPS.
My hon. Friend asked where to go from here so that his constituent could get some satisfaction. If my hon. Friend's constituent is still dissatisfied, as I perceive he is, it is of course open to him to register a complaint against the police. I understand that at no stage has he decided to take that course, not even in 1992 before the matter went before the courts. No doubt, before considering that step, Mr. Dedman would wish to consider the finding of the court that the police constable who was involved in this matter was in no way to blame. The complaints system exists so that members of the public see that their concerns are scrupulously investigated.
I shall now deal with the role of the Police Complaints Authority and remind the House of how the system works. Under the Police and Criminal Evidence Act 1984, members of the public can register complaints not only with the force concerned but through a citizens advice bureau, through hon. Members or direct to the Police Complaints Authority. All these avenues were open to my hon. Friend's constituent.
The Police Complaints Authority is required by the Act to supervise the most serious complaints. This is defined in the Act but, briefly, it covers those cases which involve death or serious injury. It also has discretion to supervise other complaints, and a duty to supervise non-complaint matters voluntarily referred by police forces because of their potential gravity, and to make reports to the Secretary of State. Finally, the Police Complaints Authority must review the outcome of every investigation, whether supervised or not, and decide whether disciplinary action should be taken against any officer.
I understand that my hon. Friend wrote to Sir Leonard Peach, chairman of the Police Complaints Authority, on 2 August of last year requesting an investigation into the way that Essex handled this case. Sir Leonard wrote to my hon. Friend saying that he understood Mr. Dedman's sense of injustice but warning my hon. Friend that it was unlikely that the Police Complaints Authority could be of much practical assistance in view of the judge's comments.
Sir Leonard also pointed out that the legislation required complaints to be formally recorded by the relevant force. He offered to make the necessary approach to the chief constable but required confirmation that Mr.
Dedman wished to pursue a formal complaint against the officer concerned. It may be helpful if I read to the House Sir Leonard's reply.

Mr. Duncan Smith: I am grateful to the Minister for taking so much time over this matter. However, the point that must be made is that, in the midst of all this, Mr. Dedman is being hounded for costs. In many senses he is worrying about his financial state and is not thinking any more about taking the matter further because, frankly, he cannot afford a moment. The fact that he is being hounded is very much part of the reason for the tremendous hesitation about where he goes from here.

Mr. Maclean: I understand that there is no cost for registering a complaint with the Police Complaints Authority. The difficulty is that Mr. Dedman pursued a case in the civil court against Essex police. The judge said that the case was misconceived and, rightly in my view, did not award the compensation that Mr. Dedman wanted. Mr. Dedman lost that misconceived case and has inevitably incurred costs of his own and police costs. However, Mr. Dedman won the case against Mr. Brown and that would be the perfect solution to the problem. Mr. Brown had a liability to compensate him but the problem is that Brown was declared bankrupt. Therefore, Mr. Dedman has not got his compensation from the one person who should compensate him. Because he failed to get that from the appropriate party, it is not right to sue others such as the police.
It is misconceived to look to an alternative pocket. I am relying on the judgment of the court in favour of Mr. Dedman against Mr. Brown. Mr. Brown is the one who should pay compensation. The court ruled that it was entirely misconceived to try to sue Essex police, and I must rely on that judgment. I think that it is right.
I was about to quote from the letter of Sir Leonard Peach but as my hon. Friend has seen a copy I shall skip that. It is of great interest to my hon. Friend but perhaps other hon. Members are not so interested.
The Police Complaints Authority does not supervise investigations or consider complaints about operational matters. While I appreciate that this must occasionally seem unfair to members of the public, I must invite the House to consider that there really is no alternative. Unfortunately, crime has been in existence as long as ownership. The police work extremely hard in crime prevention and at detecting the perpetrators of crimes. The House recognises that they have a very difficult job.
It would be wholly unreasonable to require the police to take responsibility for being unable to prevent a crime taking place. If it were otherwise, we would need to recruit half the nation as police officers and have them keep a 24-hour watch on the other half. The courts have accepted that, as a matter of public policy, the police have immunity from action over their conduct of an investigation of a particular case, but such immunity was not an issue in this case, which was considered on the facts. I certainly would not like my hon. Friend or the House to get the impression that it is not possible successfully to bring a case against the police.
In general terms, the police are liable for their actions in the same way as other members of society. Under section 48 of the Police Act 1964, a chief constable is liable for torts which are committed by members of the


force under his direction and control. The police authority must pay any damages which may be awarded against him by a court.
I accept that this provides little comfort to my hon. Friend's constituent. Unfortunately, it is not possible for the law to be able to satisfy every eventuality. I am aware that in this case my hon. Friend's constituent had good title to the boat. His redress should have been through the civil courts. What was particularly unfortunate about the case, as I said to my hon. Friend a few moments ago, was that, having won the court case against Mr. Brown, the fellow who took the boat away, my hon. Friend's constituent did not receive any compensation because Mr. Brown had been declared bankrupt. I accept that this may be scant comfort, but the liability against Mr. Brown still exists.
Many others, apart from my hon. Friend's constituent, have lost out because of difficulties surrounding title of goods. People who inadvertently buy stolen goods, maybe stolen cars, boats or anything else, do not have any recourse to law. That is a matter of real concern to people who make purchases in the second-hand market.
The Government have taken action through the crime prevention strategy to reduce the opportunity for crime by encouraging the public to undertake a range of measures such as property marking.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. Time is up.

Health Authorities and Trusts

2 pm

Mr. Paul Tyler: To put this brief debate in context, I must refer to the current discussions in the Nolan committee and the evidence that has been given to that committee. I can best illustrate the significance of the health appointments by quoting from an article by Mr. Simon Jenkins in The Times last Wednesday, entitled "Is Nolan just a paper tiger?" Mr. Jenkins is a former editor of that paper and he is scarcely a dangerous radical, so his recommendation that the Nolan committee should ask for an independent royal commission on appointments deserves the attention of all hon. Members.
Mr. Jenkins wrote:
If ministers protest hand on heart that no thought of party gain ever crosses their minds when it comes to jobs or honours, a way is open to them to set the public's mind instantly to rest. They can divest themselves of these powers. Ministers should continue to propose appointments, but to the new commission, not to Downing Street. The commission would be expected to listen and act reasonably. Some 42,000 posts in executive quangos are now available for public appointment. More Britons are appointed in a lay capacity to oversee such services as hospitals, schools, the police and social services than are chosen at elections.
He goes on:
As for the 15,000 health authority posts that had to be filled in 1991, it was that most undignified case of catch-as-catch-can in the history of public patronage. On seeing his list, one health administrator paraphrased Wellington and hoped they would 'terrify the consultants as much as they terrify me.'
In the south-west, we have had a number of terrifying incidents in the way in which health trusts have performed their duties. We had, first, for example, the collapse of confidence in the Westcountry Ambulance Service trust, which resulted, after pressure from hon. Members on both sides of the House, in the exit of the chief executive. Secondly, we have had the suspension of Sister Cooksley at the Plymouth Hospitals NHS trust; again, a U-turn and reinstatement resulted. Thirdly, we have had a series of important and worrying incidents at Treliske hospital, run by the Royal Cornwall Hospitals NHS trust. With the latter, of course, a number of inquiries are going on.
The questions that all hon. Members will wish to have answered are: who is in charge, who is answerable and to whom? Who says, "Out you go," if a trust fails? A crisis of confidence exists in the trust leadership. Why? One reason is that the public, the patients and their elected representatives feel that they have no significant role in the appointments procedure.
There was a perceptive series of articles in the Western Morning News at the end of last year entitled, "Who really runs the west?" I wish to quote briefly from an important article, headed "Why Tories tend to be picked to serve on health quangos." The article starts:
A glance down the list of Westcountry health quangos shows a distinct bias towards Conservative chairmen and board members.
It continues:
At the top of the health pyramid is the South West Regional Health Authority, which nominates chairmen of local hospital trusts and passes names on to health secretary Virginia Bottomley.
One of the SWRHA's six board members is Dame Margaret Fry, a leading Conservative grandee who chaired the annual party conference three years ago.


The article then takes a number of examples of people who, in recent months or years, have been appointed to health trusts. For example, Mrs. Sylvia Russell is described as
a frank speaking former Tory councillor who was given the £17,000-a-year job of running the Exeter and District Community Health NHS Trust.
Mrs. Russell is reported as saying:
Mrs. Bottomley has been very keen indeed to promote women into management. Rennie Fritchie (SWRHA chairwoman) is keen to promote women.
The article gives another example of Mr. Graham Andrews, a former North Devon Conservative councillor, who again was appointed as a director of the Northern Devon Healthcare trust.
The main body of the article concerns the curious saga of the appointment of Mrs. Abigail Kirby-Harris, who is described as follows:
once chairman of the St. Mabyn Conservative Association in North Cornwall, who said that it was not the slightest bit surprising that the Government should choose Tories to push through health reforms.
She added that it was natural for Ministers to pick allies to run NHS trusts ahead of people who wanted the reforms to fall flat on their face.
It was Mrs. Kirby-Harris's appointment, in the face of outspoken opposition from local Members of Parliament and some members of the NHS trust itself, which focused Westcountry attention on the way people are chosen for key quango jobs.
She was nominated by a member of another quango—Dame Margaret Fry—and rubber-stamped by the Secretary of State for Health, who was determined to put more women into top NHS jobs.

Mr. David Nicholson: Will the hon. Gentleman give way?

Mr. Tyler: I shall not give way, because I want to leave time for one of the hon. Gentleman's hon. Friends, who told me in advance that he wished to take part in the debate, as is the normal convention.
As the Western Morning News correctly pointed out, Mrs. Kirby-Harris's appointment was controversial. First, Sir Godfrey Milton-Thompson, who was the chairman in situ, was expected to continue. Having had a distinguished career in the services, rising to surgeon vice-admiral, he clearly had great expertise. Secondly, when consulted, all five Cornwall Members said that they were happy for him to continue. The hon. Member for St. Ives (Mr. Harris) said:
I don't see any reason why he should not have been reappointed. I thought it was Virginia Bottomley with her obsession with every post going to a woman.
The hon. Member for Cornwall, South-East (Mr. Hicks) asked if he might take part in the debate and I hope that he will catch your eye, Mr. Deputy Speaker. As a parliamentary neighbour and former sparring partner, I welcome him to the debate.
Thirdly, in December 1992, before the appointment was confirmed and publicised, other Cornwall Members and I corresponded with the then Minister for Health, the right hon. Member for Peterborough (Dr. Mawhinney). I wrote a fairly quiet letter. The hon. Member for Cornwall,

South-East wrote in more robust terms. The Minister's answer shows what had happened. The Minister wrote to me:
When my office passed on to me your further message about the appointment of the Chairman of the Cornwall Healthcare NHS trust, I instituted an urgent enquiry into the handling of the information you conveyed to South Western Regional Health Authority in your telephone call.
I can confirm that your message was received by the Region after the submission being sent to me by my Appointments Unit. Your views on Sir Godfrey and Mrs. Kirby-Harris were, therefore, not expressed in that submission.
It appears that, if your views were relayed to the Appointments Unit at the Department, they were not recorded and were certainly not passed on to me at any time. I have made it clear to the staff concerned that this is not acceptable and that our arrangements have got to be tightened up in future. I am extremely sorry that the system did not work on this occasion.
The submission I received did inform me however that Robert Hicks and David Harris both favoured Sir Godfrey being appointed. Having said that, for reasons I sought to explain to you when we spoke and which I have already explained to Robert, the advice I received from a range of other sources strongly recommended that Mrs. Kirby-Harris should be appointed. I felt, therefore, I was not able to accept Robert's and David's and, I now know, your advice on this particular occasion.
I want to get some positive lessons from this unfortunate incident. First, what references were taken up for this appointment? Secondly, what references are today taken up for such appointments? What written reports were available to the Secretary of State for Health? In this case, the person concerned had served from the Army and we now know from the industrial tribunal that has taken place since that the disclosed reports in the Army would have made it clear to the Secretary of State that there was no way in which this candidate should be even considered for half a minute for such an important appointment. The reason why she has been to an industrial tribunal is that she is claiming £500,000 for wrongful dismissal due to pregnancy. Thirdly, what is the point of consulting local Members of Parliament if our advice is then ignored?
Fourthly, there seems to be at least the suspicion of a hidden agenda, some sort of discrimination on grounds of gender, age or political orientation. Fifthly, why not advertise openly and set out the experience and criteria for which the Secretary of State is looking? After all, we are talking about considerable responsibilities—whether on an authority or a trust—and the people appointed exercise considerable control on the public's behalf over huge budgets.
I believe that Mr. Simon Jenkins's suggestion that there should be a royal commission on appointments and that there should be an open and honest process for such appointments is the only credible way forward to regain public confidence in the integrity, objectivity, ability and representative nature of those who run the national health service.
People do not trust the trusts and it is in the Secretary of State's hands to set that right. I hope that the Minister will be able to reassure us at the end of this brief debate.

Mr. Robert Hicks: I am grateful to the hon. Member for North Cornwall (Mr. Tyler), my parliamentary neighbour, and to the Minister for allowing me two or three minutes in which to make a


contribution to this important debate, which clearly has national implications as well as implications in Devon and Cornwall.
I would not necessarily go along with all that the hon. Member for North Cornwall said about the importance of political connections in this respect. There may be a political dimension to the examples that I shall cite, but what concerns me more is that some elements of the appointments affecting my constituency have too many characteristics of a Whitehall farce. I shall therefore concentrate on the procedures followed in making such appointments.
I begin by paying tribute to my right hon. Friend the Secretary of State for Transport who, when he was Minister for Health, was most helpful and forthcoming. When I attempted to investigate the procedures followed in such appointments, it was not clear who, under the existing arrangements, was prepared to accept the ultimate responsibility. In the three examples that I shall cite, the Secretary of State played a significant part, whether in her present role or in her previous position in the Department of Health.
It is not clear whether the ultimate responsibility lies with the Department or with the regional health authority. Ministers tend to say that they can act only on what appears on their desks and it is not clear what terms of reference they have issued to the RHAs in the first place. The RHAs themselves say that they have certain parameters within which to work, but one then calls into question the sifting mechanism that they have deployed when names have supposedly come to their attention from the grass roots.
The hon. Member for North Cornwall outlined the sequence of events that accompanied the appointment of the chairman of the Cornwall Community Healthcare trust. I shall not duplicate his comments but wish to refer to the initial appointment of the chairman of the Royal Cornwall Hospitals NHS trust. My right hon. Friend the Secretary of State consulted certain politicians representing the county, although she did not ask the advice of the two then longest serving Members, David Mudd and myself. Perhaps she did not expect to hear the response that she was seeking. In any event, she went ahead—as was her right—and made an appointment.
It is not without significance that, when the time came for a reappointment, the Secretary of State's original appointee was dropped and replaced by the person whom some of us had advocated in the beginning.
There then followed a sequence of events beyond one's imagination, involving the appointment of the chairman of the Plymouth Hospitals NHS trust. My right hon. Friend appointed the late chairman and managing director of Brymon Airways to a trust that had not even been designated at the time. Within a few weeks, he had to resign from the non-existent trust and, as it so happens, the person whom we thought was being groomed locally for the position—then the chairman of the Plymouth health authority—was appointed chairman of the Plymouth Hospitals NHS trust, now that it finally exists. If the procedures had been correct in the first place, I suggest that we should not have reached this farcical situation.
We are talking about the administration and provision of health care for a large number of people, including my constituents. Public confidence in that administration and provision is absolutely essential. When the public read objective reports of what has happened in the three cases that have been mentioned, they understandably feel a little apprehensive.
I measure my words carefully. I believe that, if the litigation involving the former chairman of the Cornwall Community Healthcare trust turns out in a particular way, those responsible at the ministerial level for appointments and those who still hold senior positions within the regional health authority must examine their own positions. It is clear that what has been happening hitherto must not be repeated in the future if we are to retain the public's confidence in the standard of health care in the parts of Cornwall and Plymouth to which reference has been made this afternoon.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): I am sorry that we do not have more time to debate the important matter raised by the hon. Member for North Cornwall (Mr. Tyler). I could not help noticing, from the Order Paper, that a pile of earth in south-east Asia is deemed to be so important that it takes up three times as much time as the question of who runs the national health service. Perhaps that is a manifestation of the extent to which we are ruled by the headlines these days. This is an important subject because enormous responsibilities are placed on non-executive members of boards and the chairmen of health authorities and trusts in the health service.
I must correct the impression given—unintentionally, I am sure—that everything was wrong with the appointments that have been made. There are cases with which hon. Members are dissatisfied but some splendid people have become chairmen and non-executive members of trusts and health authorities. I visit a great many trusts—acute trusts, community trusts, ambulance services and health authorities—and meet many non-executive and executive directors who are extraordinarily committed to the health service. Many would die for the hospital with which they are involved, which is very rewarding. Indeed, the level of accountability and responsibility that they feel is one of the reasons that there have been some remarkable successes.

Mr. David Nicholson: Since the hon. Member for North Cornwall (Mr. Tyler) started his speech by saying that he was referring to the whole of the south-west, does my hon. Friend agree that the Taunton and Somerset hospital trust in my constituency, among others, has been remarkably successful, that on its board there are members of all parties and of none, and that its success is despite the vigorous opposition of the Labour party and the Liberal Democrats before it was set up?

Mr. Sackville: I could not agree more. Taunton and Somerset is a good example of a trust that knows where it is going and is well led, which is exactly what we have been trying to achieve.
Obviously, one can find problems in a huge organisation such as the health service, with some 8 million in-patients, another 35 million out-patient contacts and nearly 1 million employees. There is room for many


things to go wrong. I am not quite sure of the connection between the three examples with which the hon. Member for North Cornwall began his speech—the Westcountry Ambulance Service trust, Sister Cooksley and two incidents in the press recently about Treliske—and non-executive appointments. Therefore, we need to be careful about using the material provided by headline writers, serious though some of those incidents may be, to make a wider point.
I have paid tribute to the non-executives of our trusts and health authorities because under them there has been remarkable progress. Many, many more people have been treated. Over 120 patients are treated today for every 100 treated before the reforms came into place. That is a tribute not only to the boards but to the staff generally for taking on an extraordinarily larger work load, albeit with some additional resources. Hospitals have become much more efficient—they have had to cope with the rising demand for health care.
Waiting lists and waiting times are much in the news. Under the reforms, in hospitals and authorities on which those non-executives serve, we have found that the average waiting time for operations has fallen from nine to five months and that the time people wait for a first consultant appointment has fallen radically. Many health authorities, before we set any national standards, were demanding that people should not wait more than a certain number of months, usually in single figures in good cases, for their first consultant appointment. So much progress has been made.
Partly, the chairmen and non-executives have been driving that progress, sometimes with not much encouragement from medical staff who have said that to think constantly about waiting lists distorts priorities and medical staff should have total control over the priorities of any hospital. However, we know, from our constituents and from everything that we find, that waiting times are important to patients, however lacking in urgency their conditions, and they should not be told that they will have to wait two years to see a consultant. Certainly, they should not discover that they need certain treatment and be made to wait years for it.
We are bringing those times down to 18 months, to 12 months and to less, so that people will not be able to say that they do not know when they will be treated. That will become a thing of the past. Under the leadership of some of our chairmen and chief executives, that has happened. However, I agree that there is a lack of uniformity in the appointment system, although it has thrown up thousands of good, committed people. Because people have found the opposite in some cases, we have sought to find a more formal system which people outside will be able to understand.
The first stage of the process is to require all regional health authorities or regional members of the policy board, as there may be if the Health Authorities Bill reaches the statute book, to advertise all posts or groups of posts—there may be difference in procedure between one area and another. There should be free and open advertising so that people can write in to say that they would like to serve on a trust or health authority.
When that stage is complete, a panel of non-executives, usually from around a region, will sift through those names to decide which of those people would appear on

the face of it to be suitable to serve on trusts and health authorities. The panels should do that according to agreed criteria.

Mr. Tyler: I am conscious of the limited time, but could the Minister specifically address the question of short lists in the cases to which the hon. Member for Cornwall, South-East (Mr. Hicks) and I referred? As we all know, there was an unmitigated disaster with one appointment because only two people were on the short list. The person appointed turned out to be totally unsuited to the post, while the person who was, in effect, ejected, was subsequently to take the Department to an industrial tribunal. Again, in the Western Morning News, headlines said:
Payouts settle complaint of jobs for girls",
and:
Bottomley spared appearance in sex discrimination case".
All that could have been avoided if the short lists had not been so short.

Mr. Sackville: I understand why the hon. Gentleman is harping on about that unfortunate case, although I repeat to those hon. Members just arriving in the House that it was totally unrepresentative of the generality of health appointments. However, clearly the hon. Gentleman is quite right: we need a larger pool of names from which those who have the task of sifting can draw candidates. Competition is likely to hot up because, surprising though it may seem given all the difficulties and all that is said about the health service, large numbers of people wish to serve as non-executives on health authorities and trusts.
As I said, having advertised, the candidates must be looked at against published criteria. We shall be dealing with guidelines on that criteria in the near future and it will be open for everyone to see the personal and career criteria that we would like to see for those people who serve in that position in the health service.
There is also of course a code of conduct and accountability, very much along the lines of the Cadbury report, covering all matters of governance of public companies and public organisations. All those who serve and who are appointed will be reminded that they must have very high standards of achievement in those sectors. They must maintain standards of discretion, and in all the areas that one expects of someone who is put in a position of great responsibility in a public organisation. That is important.
I very much regret the cases—some may be quoted—when the system has failed to satisfy or, indeed, has resulted in the appointment of people who turned out to be unsatisfactory. While they are in a minority, we seek to avoid such cases.
I shall deal with the objections put forward by my hon. Friend the Member for Cornwall, South-East (Mr. Hicks), who said that he and local Members of Parliament were consulted on appointments and it appeared that their advice was not taken. We cannot give an absolute guarantee to hon. Members, because, clearly, as the House will understand, views of local Members of Parliament are one source of advice on appointments and there may be many other views from other organisations, from individuals and, indeed, from an interview process that, up to now, has been conducted by regional chairmen or district chairmen. Interviews tended to be conducted by regional chairmen when appointments of chairmen for districts were being made.
We cannot guarantee that the advice of our parliamentary colleagues will be taken in every case, but we can at least say that consultation is taken extremely seriously and that all views, especially those of our parliamentary colleagues, are taken into account and always have been.
My hon. Friend the Member for Cornwall, South-East asked who is responsible in the Department of Health. Clearly my right hon. Friend the Secretary of State is ultimately responsible for all appointments, but there are some divisions of responsibility. She takes advice from different ministerial colleagues within the Department, depending upon which part of the country is involved. An enormous selection process has to take place. It happens mainly at regional level, but it also requires a great deal

of work by Ministers, who monitor the recommendations made by the regions. That process is shared out round the country.
There will be a more codified system of appointments in the health service, and it will be open and understood. We value trust boards enormously as a central part of the reforms; they cost the NHS 1p out of every £11 spent by a trust, and we think that that is good value. I pay tribute to all who serve on trusts and health authorities, often in difficult circumstances, for the wonderful job that they do.
It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, pursuant to Order [19 December].

PRIVATE BUSINESS

SHEFFIELD ASSAY OFFICE BILL

Read the Third time, and passed.

Oral Answers to Questions — SCOTLAND

A9

Mr. Bill Walker: To ask the Secretary of State for Scotland what plans he has to change the current policy on roadside services on the A9 between Perth and Inverness.

The Parliamentary Under-Secretary of State for Scotland (Lord James Douglas-Hamilton): My right hon. Friend will consider carefully the responses to our current consultation exercise before deciding whether any change in A9 policy is desirable.

Mr. Walker: I thank my hon. Friend for that reply. He will realise that the A9 north of Perth is not a dual carriageway, although it should be. The plain truth is that the local communities—the bypass communities—wish to maintain the situation whereby they provide the services and facilities, because that means jobs. Lay-bys with toilet facilities and picnic facilities are required on the A9; that would adequately meet the demand both from the tourist trade and from other motorists.

Lord James Douglas-Hamilton: My hon. Friend makes a powerful and persuasive case, and we shall consider it sympathetically in the consultation exercise. The business interests of the bypass communities are extremely important, and our aim is to enhance the welfare of all the communities concerned. Tayside regional council's preferred location for a large roadside service area would be on the northern outskirts of Perth, and we shall keep my hon. Friend's thoughts on the subject very much in mind.

Renewable Energy

Mr. Gallie: To ask the Secretary of State for Scotland what steps he has taken in the past year to expand the usage of renewable energy in Scotland.

The Secretary of State for Scotland (Mr. Ian Lang): I announced the details of the first order under the Scottish renewables obligation on 20 December 1994. That obliges the two public electricity supply companies in Scotland, Scottish Power and Scottish Hydro-Electric, to obtain 76 MW of new capacity from renewable sources.

Mr. Gallie: Will my right hon. Friend confirm that the expanded use of renewable energy sources adds a cost burden for Scottish electricity consumers? Will he point out to Opposition Members that if they wish to pursue high energy cost options, they should do so at a reasonable level? I congratulate my right hon. Friend on getting the levels right.

Mr. Lang: I am grateful to my hon. Friend for saying that. He makes a reasonable point, but I am sure that he will welcome the fact that renewable energy sources are being developed in that way. The additional costs, spread over three or four years, will amount to less than 0.5 per cent., which is an acceptable increase against a background of electricity prices that have fallen substantially in real terms since privatisation.

Mrs. Liddell: I am surprised at the Secretary of State's statement, and would be grateful if he explained how he

can say that about renewable energy when he has turned down a pioneering proposal for the Dalmacoulter landfill site, in my constituency. The proposal—to burn off methane gas to generate electricity—would provide enough fuel to heat 1,000 homes for 20 years, and fits in with the Government's new much-vaunted private sector initiative. What is more, it would require an investment of only £100,000—less than half the salary of the chief executive of Scottish Power.

Mr. Lang: I have to point out to the hon. Lady that the bid was not successful because it was so expensive. The Dalmacoulter landfill site bid failed to obtain a contract because it was the most expensive of all the eight landfill gas projects bidding for a contract, and was priced considerably in excess of the director general's recommended ceiling price. It was for that reason, and no other, that it was unsuccessful.

Dunbartonshire Enterprise

Mr. Tom Clarke: To ask the Secretary of State for Scotland when he next expects to meet Dunbartonshire Enterprise to discuss the future of the industrial site at Gartcosh.

The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart): My right hon. Friend and I are fully aware of the position at Gartcosh but we have no plans at present to meet Dunbartonshire Enterprise to discuss that.

Mr. Clarke: Does the Minister recall that that site has lain empty since 1986? Will he tell us how much has been paid, or will be paid, to Dunbartonshire Enterprise by North British Newsprint? Will he tell us whether the Government will give positive support to that project? If it does not succeed—and we need to know very soon—will the Government use their influence, including their influence with Locate in Scotland, to ensure that jobs, investment and training are made available to a job-starved community?

Mr. Stewart: The hon. Gentleman has a long-standing and respected interest in that site. I share his regret that North British Newsprint has yet to find a partner to invest in newsprint production facilities. We are still hopeful that that can be achieved in the near future.
I agree with the hon. Gentleman that the present position cannot be permitted to continue indefinitely. Scottish Enterprise will soon need to consider the future of the whole site. Discussions are taking place with potential inward investors who have expressed an interest in parts of the Gartcosh site. If the hon. Gentleman wants a meeting to discuss the present position in more detail, I would be happy to agree to that.

Mr. Worthington: When the Minister meets Dunbartonshire Enterprise, will he discuss its future shape and size? Will he please reject the opinion of those who propose that Clydebank and Milngavie be put in with Glasgow or, even more absurdly, that Dunbartonshire be linked with Renfrew? Will he reject such absurd proposals and retain the current boundaries?

Mr. Stewart: The hon. Gentleman and a number of his colleagues met me this week to express their very clear views on those matters. We are formally in a consultation period; Scottish Enterprise is consulting on those matters.


However, perhaps I may reassure the House by saying that I take very seriously the well-considered views that were expressed to me by hon. Members.

Commercial Property Law

Mr. Thurnham: To ask the Secretary of State for Scotland what representations he has received about the commercial property law in Scotland.

Mr. Stewart: During 1994, representations about commercial property law were received from the British Retail Confederation.

Mr. Thurnham: For the benefit of Mr. Max Davidson and others, can my hon. Friend confirm that the law in Scotland is different from the law in England, in that Scotland does not have the iniquitous privity of contract that we suffer here? Will he remind his colleagues in the Lord Chancellor's Department and the Department of the Environment how much better Scottish law is?

Mr. Stewart: I am grateful to my hon. Friend for those compliments. Of course, he is essentially correct.

Mr. McAllion: That is why we need a Scottish Parliament.

Mr. Stewart: I shall not be diverted by the hon. Member for Dundee, East (Mr. McAllion).
My hon. Friend rightly pointed out to the House that privity of contract does not apply in Scotland. In Scots law, when a lease is assigned to a new tenant, the previous tenant is released from liability unless the parties specifically contract otherwise, in contrast to the position in England. I know that my right hon. and noble Friend the Lord Chancellor intends to introduce legislation at the earliest opportunity, and I hope that my hon. Friend's long campaign on that issue, which I think commands support on both sides of the House, will therefore shortly reach a successful conclusion.

Mr. Home Robertson: Will the Minister institute a review of the effects of recent legislation on commercial railway property in Scotland? What is the sense of legislation that will lead to the closure of lines, a loss of key services such as sleepers and the criminal neglect of public assets such as the Forth railway bridge?

Mr. Stewart: I congratulate the hon. Gentleman on his ingenuity. I can reassure him that the structure of the railways in Scotland will remain intact.

Mr. Menzies Campbell: While the Minister rightly extols the virtues of Scottish law, will he reflect on the fact that the Scottish legal system is the only domestic system of law in western Europe without its own Parliament? Do not the merits of the Scottish legal system now justify a Parliament in Edinburgh?

Mr. Stewart: There is, of course, an arguable case for independence, although I do not agree with it. There is not an arguable case for the proposition being put forward by the Labour party, which does not seek to answer any of the serious questions. When challenged on serious issues such as the West Lothian question and others, the only answer given by the hon. Member for Hamilton (Mr. Robertson) is to say that they are all red herrings—what a way to conduct a serious policy.

Local Government Employees

Mr. Harry Greenway: To ask the Secretary of State for Scotland how many people are estimated to be currently employed in local government in Scotland; in how many local authorities they are operating and at what overall cost per head of the population of Scotland; and if he will make a statement.

Mr. Lang: As at September 1994, 304,532 people were employed throughout the 65 local authorities in Scotland. Staff costs per head of the Scottish population in 1993–94 were £898, compared with only £668 per head in England.

Mr. Greenway: I thank my right hon. Friend for that reply. Why does it take so many people—

Mr. Michael J. Martin: What does it have to do with the hon. Gentleman?

Mr. Greenway: What does it have to do with me? The English are paying for it—partly, anyway. That is a fact. My constituents are partly paying for it. Why does local government in Scotland cost so much, when, presumably, wage costs there are a little lower than they might be in London, where I have my constituency? Why does it involve so many people at such a high cost? Why do we have senseless demands for a Parliament for Scotland, which would impose even more government—another layer at even greater costs—on Scotland?

Mr. Lang: My hon. Friend makes some sound points. One must ask why, when there are constraints on public expenditure and local authorities should be considering the burden that they impose on council tax payers, staff numbers have been increased by 2,500—about 1 per cent. —in the past year, when in England, local government staff numbers have been reduced by 2 per cent.

Mr. Michael J. Martin: The Minister will know that, because of all the redundancies in the traditional engineering works in and around Glasgow, local authorities have become an important source of employment. I hope that he will not use the new reorganisation of local government to sack local authority workers.

Mr. Lang: Decisions about the employment levels of local authority staff are a matter for local authorities. While I anticipate that there will be some saving from the 300,000 and more people employed in local authorities, it would be a relatively small saving. The hon. Gentleman makes a fundamental mistake in pretending that employment in a local authority offers the same productive contribution to the wealth of a nation and the output of its economy as employment in private industry—there is a world of difference. The taxes generated by the profits of the private sector sustain the bureaucracies in the public sector.

Mr. Raymond S. Robertson: Does my right hon. Friend agree that the real threat to local government services and jobs in Scotland comes not from our plans for reorganisation, but from plans for a tax-raising Scottish Assembly? If it is to have a meaningful role in the life of the nation, the Assembly will take powers from the House and plunder town halls and council chambers throughout Scotland, taking away their powers to centralise them in Edinburgh. Does my right hon. Friend


agree that anyone who believes in strong, responsive, sensitive and genuinely local democracy should join us in opposing Labour's plans?

Mr. Lang: My hon. Friend is right. At a time when the Government have been seeking to reduce bureaucracy and simplify local government by introducing a single-tier structure, the Labour party is bent on creating another centralising Parliament in Edinburgh that will increase bureaucracy and the burden of administration and centralise power from local government to Edinburgh.

Mr. Wallace: Given that the Secretary of State used the increase in local government employment as one reason for imposing an unjustified and unacceptable squeeze on local authority funding in the forthcoming year and given that he seems to be well armed with figures, will he answer the following question? How much of the increase that he mentioned will be accounted for, first, by the number of people employed in full and part-time work to clear up the mess of the poll tax and implement the council tax and secondly, by the increase in the number of staff employed in social work departments to implement the Government's community care policy?

Mr. Lang: There is no reason why the number of staff employed in local government should be increased to clear up the backlog of uncollected poll tax. That should have been cleared up substantially in previous years.
Central services alone increased by almost 5 per cent. last year in Scotland. In the constituency of the hon. Member for Hamilton (Mr. Robertson), there has been a 9 per cent. increase in the number of full-time staff. Such increases bear no relation to the needs of the local electorate and they take no account of the burden that they impose on council tax payers.

Lady Olga Maitland: Does my right hon. Friend agree that the increase in the number of jobs in local government is nothing more than jobs for the boys and another example of loony government spending?

Mr. Lang: If the House will not accept my hon. Friend's word, perhaps it will accept the word of Mr. Leo McKinstry, a former Labour councillor in Islington, who last week wrote in The Spectator:
The electors can be warned now of things to come under Labour. They need look no further than the present record of Labour in local government".

Mr. Graham: Will not the Secretary of State do the right thing and congratulate the local authority workers who responded to the flooding in Scotland? If they had not been there, our folk would have suffered a tragedy because of the inaction of the Scottish Office.

Mr. Lang: That is unworthy of the hon. Gentleman. I congratulate all those who took part in the emergency services operation following the flooding in Scotland. I hope that the hon. Gentleman will join me in congratulating them and also those in local and central Government who have done so much to ease the problems arising from that emergency.

Mr. McAllion: Will the Secretary of State try to understand that the higher levels of spending and employment in Scottish local government reflect the higher levels of social deprivation and illness in our country; they reflect the outstanding success of local

authority schools in Scotland; and, above all, they reflect the increasing burdens that the Secretary of State has placed on Scottish councils, with 65 per cent. of the 2,500 staff to whom he referred employed in the areas of social work and policing?
If the right hon. Gentleman is genuinely concerned about the comparisons between Scotland and England, will he explain why, for the past two and a half years, he has refused to take up the offer by the Convention of Scottish Local Authorities to commission jointly an independent study into those comparisons? Is he afraid of the truth and the light that the study may shed on the prejudiced hysteria that passes for Government policy in this area? It is time to put up or shut up. Will the Minister accept COSLA's offer and put an end to the political poison levelled against Scottish local government?

Mr. Lang: I am trying to save the hon. Gentleman from himself, because he is totally misinformed. I invited the Convention of Scottish Local Authorities to undertake that study two or three years ago. It said that it would undertake the study, but it did not do so.

Homelessness

Mr. Welsh: To ask the Secretary of State for Scotland when he intends to outline the Government's proposals on homelessness following the responses to the consultation paper "Tackling Homelessness"; and when he intends to resume the planned consultation exercise on amending the 1991 code for guidance.

Lord James Douglas-Hamilton: We are still considering the 160 responses received to the consultation paper, "Tackling Homelessness", and we shall announce our decisions in due course. A revised draft code of guidance on homelessness, taking account of those decisions, will be issued for comment later this year.

Mr. Welsh: Does the Minister accept that homelessness is an acute and growing problem in Scotland? He issued a consultative document entitled "Tackling Homelessness", but he has done absolutely nothing about it and his reply today is a disgrace. Will he acknowledge publicly that 97 per cent. of responses want local authorities to retain a duty to house homeless persons in priority need? In England there was action within four months, but six months have passed and the Scottish Office has done nothing. That is quite unacceptable.

Lord James Douglas-Hamilton: The hon. Gentleman is completely incorrect: the Scottish Office has done a substantial amount in that area. I recently attended the opening of a homelessness advisory centre in Dundee, not far from the hon. Gentleman's constituency, which was funded to the tune of £80,000 by Scottish Homes. Earlier this year, an advisory service run by Shelter was established in Edinburgh with funding of £94,000. We have given £29 million in capital allocations for homelessness.
The hon. Gentleman's constituency received a supplementary payment of £290,000—which it asked for—in February 1992. Since then, his district council has not asked for any further supplementary allocations in that area, so he is incorrect on the first point. With regard to


the hon. Gentleman's second point, we shall give the matter the most thorough and complete consideration and we shall announce our decision.

Mr. McMaster: Will the Minister confirm that many hundreds of families in Strathclyde are still homeless following the floods in December? Is he aware that those families do not wish to return to their homes until they know that there are adequate flood prevention measures to ensure that such floods will never happen again? Instead of passing the buck to cash-starved local authorities, will the Minister admit today that, under section 155 of the Local Government and Housing Act 1989, he has the powers to introduce flood prevention schemes? If he does not, will he support my private Member's Bill on 10 February, which will give him those powers?

Lord James Douglas-Hamilton: We shall need to study the fine print of the hon. Gentleman's Bill. With regard to his question about section 155, that is why we have Bellwin. As I promised the hon. Gentleman when I visited his constituency and saw the houses in Ferguslie park, we shall be looking fully at the entire housing budget before we make final decisions on housing. We shall have the issue of flooding particularly in mind and the interests of his own district council and other interested district councils, including Strathkelvin and elsewhere.

Mr. Charles Kennedy: Is the Minister aware of the growing concern in Inverness specifically and the Highlands generally about the homelessness problem there? On Monday this week Albyn Housing, a local housing association, briefed my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston) and myself on the problem and told us of the alarming rise in the number of homeless people sleeping rough in the streets. It was highly critical of the Scottish Office in particular, for the continuing squeeze and cuts in real terms on the housing budgets for both Scottish Homes and the relevant local authorities. Will he look again at Inverness and the Highlands with urgency? It is now a matter of considerable public concern.

Lord James Douglas-Hamilton: The hon. Gentleman's housing association is impressive and has done an extremely good job in Inverness. About £900 million will be spent on capital investment in housing this coming year. That is a very substantial sum. We expect the work of housing associations, such as the one that he mentioned, to be on-going, and we shall give them the necessary support.

Mrs. Fyfe: The Minister mentioned Shelter. Has he had any discussions with Shelter and other organisations about the scandal of homelessness among young people who have been in local authority care and who end up on the streets? Does he know that children coming out of care are 70 times more likely to become homeless than their contemporaries? Does he agree that, if local authorities should have powers to advise and assist care leavers up to the age of 21, they should have the resources to do so?

Lord James Douglas-Hamilton: Homelessness is one of the top strategic priorities for all local authorities. We are giving hundreds of thousands of pounds worth of grants to voluntary bodies such as the Scottish Council for Single Homeless, Borderline and other bodies and

initiatives. In the Bridges project, one initiative in Edinburgh, we are ensuring that all the voluntary and statutory agencies work together. We expect local authorities to give the subject top priority.

Mr. Bill Walker: Is my hon. Friend aware that the Scottish Homes rural initiative in my constituency, whereby empty properties have been brought back into use at low cost, goes some way towards dealing with some of the homelessness? In addition, is he aware that the help given to Perth and Kinross district council after the flooding was very well received?

Lord James Douglas-Hamilton: My hon. Friend is absolutely right. Scottish Homes has an impressive record. It will provide 2,500 units for homeless people this year, and the rural empty homes initiative developed in Tayside in conjunction with the Scottish Landowners Federation has been evaluated as a success. There have been other initiatives such as the lead tenancies initiatives, under which housing associations are enabled to lease empty properties and sublet them to the homeless. There is also an important initiative in many towns in Scotland, to identify empty properties in upper floors in town centres and bring them back into use. Grants for rent and ownership are also a help in that respect.

Burns Day

Mr. Canavan: To ask the Secretary of State for Scotland if he will bring forward proposals to make Burns day a national holiday.

Mr. Lang: Although there are no plans to propose that Burns day be made a national holiday, I do not think that we need such an event to remember our greatest poet. We have continued to celebrate his works since his death almost 200 years ago, and I am sure that we shall do so for many years to come.

Mr. Canavan: Does that negative, disappointing reply have anything to do with the fact that Burns was an ardent supporter of a Scottish Parliament and a fierce critic of the Unionists, who used treachery, bribery and skulduggery to destroy Scotland's last Parliament?
Why are the Tories' prospects dim?
Could it be the reputation
Of Ian, Allan, Hector and Jim—
Such a parcel of rogues in a nation?

Mr. Lang: Now I know what the poet meant when he spoke of
A rhyming, ranting, raving billie".
I will say to the hon. Gentleman:
Hale be your heart, hale be your fiddle,
Lang may your elbuck jink an' diddle.
As to Burns being a supporter of a Scottish Parliament, I remind the hon. Gentleman of his words in "The Dumfries Volunteer":
Be Britain still to Britain true
Amang oursels united
For never but by British hands
Maun British wrangs be righted.

Mrs. Ray Michie: If the Secretary of State will not honour our national poet in that way, will he consider making 30 November, St. Andrew's day, a national


holiday? I wonder why Scottish Office Ministers lack a sense of adventure, which would allow them to dare to make a change, go out on their own and do something about a national holiday for Scotland. Never mind the Prime Minister and his dark words of danger and more danger.

Mr. Lang: I take the opportunity to welcome the decision by the Royal Mail to publish a set of stamps to commemorate the bicentenary of Burns's death. As to another public holiday, I do not think that it would be an appropriate step to take at this time. As the poet said:
I am the keeper of the law
In some sma' points, altho' not a'".

Mr. Donohoe: As the only Ayrshireman in the House, I believe that the proposal of my hon. Friend the Member for Falkirk, West (Mr. Canavan) should be considered much more seriously than the Secretary of State suggested. I draw the right hon. Gentleman's attention to a bizarre decision in Irvine to shift the Burns monument from the moor to the middle of a busy roundabout. If anybody is killed, will the Secretary of State take responsibility for that crazy decision, which was taken partly by Ayrshire Enterprise? Instead of such officials' salaries being increased, perhaps they should be docked.

Mr. Lang: I was not aware of the case that the hon. Gentleman mentioned, but if he will send me details, I shall have the matter investigated and—to the extent that the matter may be the responsibility of the Scottish Office, although I suspect that it lies primarily with the planning authority—I shall see whether there is anything appropriate for me to do.

Mr. Gallie: Given that Robert Burns was born in Alloway in my constituency, will my right hon. Friend congratulate Ayrshire Enterprise and all those who are supporting the Burns bicentenary next year on ensuring that the works and words of that poet are broadcast loud and clear world wide?

Mr. Lang: My hon. Friend makes an important point. There will be major opportunities for not only his constituents but Scotland as a whole to celebrate that important occasion, which will be internationally recognised. I am sure that the poet would approve of the actions of those who, as he put it,
doucely manage our affairs in Parliament".

Mr. Salmond: Before the Secretary of State determines whether to make Burns night a national holiday, will he tell the House whether he has seen the cartoon in The Scotsman today, which depicts the Prime Minister as a giant puddin' over the caption:
Great Chieftain o' the Puddin' Race"?
Is the Secretary of State in any way offended that he was not depicted as a wee puddin' in the same cartoon?

Mr. Lang: I am impervious to all cartoons and all other comments, whether written or drawn.

Hospitals

Mr. Norman Hogg: To ask the Secretary of State for Scotland what plans he has for new hospital development in west central Scotland; and if he will make a statement.

Lord James Douglas-Hamilton: There are proposals for new hospital development and refurbishment in west central Scotland, most notably in the Greater Glasgow and Lanarkshire health board areas.

Mr. Hogg: Is the Minister aware that in 1992, and immediately prior to the general election, the then Scottish Office Minister with responsibility for health, the right hon. Member for Stirling (Mr. Forsyth), had a positive approach to the building of a new hospital in Cumbernauld, and announced that it would be built?
Is the Minister further aware that the Minister who now has responsibility for health appears not to have done anything about the hospital? He appears to be bewildered by the breadth of support for it and fumbles with health matters to the extent that we do not know what is happening with regard to the hospital. Lanarkshire health board does not even do me the courtesy of replying to the letters that I write on the subject. Will the Minister intervene personally to ensure that the hospital is built, and built soon?

Lord James Douglas-Hamilton: The health board is working on revised proposals, which we have not yet seen. The latest proposals will give future occupants much more privacy and comfort. The aim is to continue to assess demand against need. It would not be right for us to impose an artificial deadline on the board's deliberations. The hon. Gentleman's letters should have been answered, and I shall draw that to the attention of the board.

Mr. Hood: The Minister will be aware that the present trust management at Law hospital in my constituency will be in charge of the new trust hospital, New Law hospital, in Netherton. Will he comment on the announcement this week that the management has put out press releases telling people not to turn up at the casualty and emergency department? As a result of its mismanagement, it has failed to get contracts signed to man the department after 1 February, in a few days time. Is it not truly alarming that our health service is being run with a so-called market and trust philosophy, and that in less than seven days a casualty and emergency department which served 40,000 patients last year faces closure?

Lord James Douglas-Hamilton: I have made inquiries. The proposed restrictions at the accident and emergency unit at Law hospital are the result of recruitment difficulties. There is no substance in the allegation that there are funding problems. The temporary arrangements involving locums will ensure that an adequate service is maintained. All emergencies will be dealt with. Only those patients with minor injuries and ailments are being asked to consult their general practitioner first. Efforts are being made to find a more permanent staffing solution. The intention is that Law


hospital will transfer to the new district hospital at Wishaw. Services at Stonehouse will transfer to the redeveloped Hairmyres hospital.

Mr. George Robertson: Is it not a fact that the latest and newest hospital in west central Scotland is the Health Care International in Clydebank, which survived the Secretary of State's official opening for only 110 days before going into liquidation? Is it not also a fact that 80 per cent. of the multi-million pound regional assistance given to Health Care International was provided on the basis of only a third of the jobs promised at that time? What possible defence is there for making another £4.4 million of taxpayers' money available to the financial drainpipe of HCI, other than that it will be a sweetener to those who are already to get a bargain basement deal, with a hospital without debt costing the entire country £180 million, or an expensive face saver for the Secretary of State for Scotland after the fiasco of the decade?

Lord James Douglas-Hamilton: With respect to the hon. Gentleman, he is not correct in saying that it cost the country £180 million, because £30 million was committed from the public sector and £150 million from the private sector. No further offer of assistance has been made. There is no reason in principle why the balance of the existing offer should not be transferred to a new operator, subject to appropriate conditions, if the project is being taken forward as originally envisaged and the planned new jobs are being created. I must remind the hon. Gentleman of his words on 10 January, when he said:
We are not opposed to public/private partnerships—they bring in much-needed money".
He is right on that. It was an inward investment project. If one takes all the investment projects in Scotland together, one can see that they have brought in more than 50,000 jobs, which have enormously benefited our countrymen. We very much hope that these matters will be sorted out shortly and that 350 jobs will be secured.

Land Register

Mrs. Ewing: To ask the Secretary of State for Scotland when he expects work on the land register for Scotland, as defined by the Land Registration (Scotland) Act 1979, to be completed.

Mr. Stewart: The operation of the land register in Scotland is being progressively extended to cover all counties by 2003.

Mrs. Ewing: Given that the Minister must be aware of the criticisms contained in the 46th report of the Public Accounts Committee, which indicates quite clearly that there was a 14-year delay in completing land registration in Scotland, will he tell the House why that delay has occurred, particularly as there will be conveyancing cost benefits to many people when it is completed? Will he also tell me why no county north of Stirling has yet been subjected to land registration, given that the land issue in the highlands and islands and in the north-east of Scotland is very topical—indeed, even contentious—at times, against a background of Scottish islands being won in German game shows?

Mr. Stewart: The timetable was announced in answer to a question from my hon. Friend the Member for

Tayside, North (Mr. Walker) in June 1992. If there is any delay, it is the hon. Lady's delay of two and a half years before complaining about it.
Our response to the report of the Public Accounts Committee will be published shortly.

Mr. Wilson: Can the Minister tell me any good reason why instead of a 14 or 20-year process to find out who owns the land in Scotland there should not be a fixed date on which every land owner, irrespective of nationality, is required to produce title deeds and thereby register his ownership of the land? Is it possible that one of the reasons why that is not done is that many of the grand old Scottish lairds, clan chiefs and all the rest of that social detritus might have great difficulty in providing title deeds?

Mr. Stewart: That is the usual load of nonsense from the hon. Gentleman. The process of extending the land register was announced two and a half years ago and it is going ahead as announced in the original programme.

Mr. Raymond S. Robertson: Does my hon. Friend find it rather strange that the hon. Member for Moray (Mrs. Ewing) chose to raise her question, when her own party's administration in Grampian region has recently sold off large tracts of Aberdeen to an English company and is refusing to sell it to the Aberdeen tenants?

Mr. Stewart: The House will note with interest what my hon. Friend says. I have always understood the policy of the Scottish National party to be independence in Europe, which, in principle, means that Scottish land can be sold—and should be sold—to anybody in the Community, including the English.

River Clyde

Mr. Dunnachie: To ask the Secretary of State for Scotland what plans he has to meet representatives of the Clyde port authority to discuss the dredging of the River Clyde.

Mr. Lang: Responsibility for flood prevention measures on non-agricultural land lies with regional authorities under the Flood Prevention (Scotland) Act 1961. Clyde Port Ltd. has no statutory duty to dredge the River Clyde but has a permissive power to dredge to the extent necessary for its operational needs.

Mr. Dunnachie: Will the Secretary of State cast his mind back to when his hon. Friend the Member for Eastwood (Mr. Stewart) piloted a Bill through the House, making the Clyde port authority a private firm and making three of its directors near-millionaires? It appears that the only thing that was dredged at that point in time was its accounts, not the River Clyde. Can the Secretary of State give me an assurance that, when he returns to the Back Benches, he will not become a director of that company?

Mr. Lang: The Bill under which the Clyde port authority was privatised was general, permissive legislation. I am sure that the hon. Gentleman would welcome the fact that, under the present management, Clyde Port Ltd. has been reorganised and has grown considerably. It is now valued at £55 million and increased profits last year to £4 million.

Mr. Galbraith: Does the Secretary of State realise that my constituents are convinced that one reason for the


recent flooding is the failure to dredge the lower Kelvin and the upper Clyde? Will the right hon. Gentleman therefore fund a study of the contribution that the non-dredging of the Clyde made to the flooding and, if it is shown to be a contributory factor, fund the necessary restructuring work to prevent it happening again?

Mr. Lang: I have already made it clear that the Government are willing to consider all such studies that are put to them by the relevant regional authorities, and have already undertaken to contribute to the funding of the study by the Clyde river purification board. I imagine that the hon. Gentleman will be aware that the River Kelvin once it enters Glasgow, falls some 30m to reach the Clyde, so it is unlikely that the Clyde itself can be the cause of flooding in Strathkelvin.
However, I can tell the hon. Gentleman today that, following my consideration of initial estimates now received from local authorities, I propose to increase Renfrew district's housing capital allocation for next year by £2 million and Strathkelvin district's by £500,000. I also propose to approve Glasgow district's bid for an extra £200,000 in the current year. I am sure that the House will welcome those announcements.

Mr. George Robertson: Is not the Secretary of State worried that the interest in Clyde Port Ltd. is not just in its dredging activities but in the gold digging of those who were lucky enough to be on the board at the time that it was privatised? Is not he aware of the widespread disgust and outrage felt throughout the country at the displays of corporate greed? Is not that a classic example of where an investment of as little as £75,000 in public assets has led, through the Government's fruit machine economics, to pay-outs of upwards of £5 million to directors?

Mr. Lang: The hon. Gentleman seems to be unaware that the company was marketed entirely openly and that the best bid secured it. That is the way in which industries have been privatised to the great benefit of the taxpayer, of those who in the past have had to fund loss-making organisations, and of those organisations themselves who have not been able to raise capital resources because they have been dependent on an external financing limit controlled by the Government. Surely the hon. Gentleman has learnt by now that national ownership has been the death and damage of many major British industries which are now released, liberated, productive and tax generating to the Exchequer as a result of privatisation.

Investment

Mr. Kynoch: To ask the Secretary of State for Scotland when he last met representatives of Scottish business and industry to discuss future investment plans; and if he will make a statement.

Mr. Lang: I regularly meet representatives of Scottish business and industry to discuss various matters, including investment.
Recent business surveys show increasing business confidence and positive investment intentions in manufacturing and other sectors of the Scottish economy. I welcome this further evidence of the success of the Government's economic policies.

Mr. Kynoch: My right hon. Friend has already referred to the article in The Spectator by Leo McKinstry, the former top Labour party aide. Did my right hon. Friend

read his comments regarding Labour's proposal to return business rates to the control of local authorities? He said that under those circumstances business rates would soar. Does my right hon. Friend agree that that proposal, along with the tax raising proposals of a Scottish Parliament which would inevitably bring higher taxation to Scottish business, would mean that inward investment would be driven away from Scotland—in short, that Labour's policies are bad for Scottish business, bad for the Scottish economy and bad for the Scottish people?

Mr. Lang: I absolutely agree with my hon. Friend. He will be aware that, as a result of the Government's policy, business rates in Scotland have fallen from 76p in the pound to 43p. Only last week I wrote to the hon. Member for Hamilton (Mr. Robertson), to which letter I still await a reply, asking him to confirm whether the policy announced for England to abolish capping and to allow local authorities to depart from the uniform business rate, will apply in Scotland. Perhaps he will take the opportunity of this Question Time to make his party's position clear.

Mr. Ingram: The Secretary of State's response to the announcement by Rolls-Royce of its intention to axe 600 highly-skilled jobs smacked of complacency and indifference. Does he agree that Scotland and Lanarkshire cannot afford to lose such jobs? Has he any plans to meet the company to seek a reversal of that decision and, if not, why not?

Mr. Lang: Of course I regret the fact that Rolls-Royce plc is to shed some 600 jobs, reducing its work force in Scotland to about 4,000. It has carried out major rationalisation programmes in all parts of the United Kingdom, and I am sure that it is in its long-term interests to face, in a sensible and realistic way, the commercial decisions that it must make.
I invite the hon. Gentleman to join me in welcoming the fact that, last month alone, unemployment in Scotland fell by 4,500 jobs. In the past seven years, unemployment in East Kilbride has fallen by 2,300 jobs, and unemployment in Scotland is now down to 8.5 per cent. It is falling month by month, and remains lower than unemployment in the rest of the United Kingdom.

Mr. McFall: When will the Conservative party stop telling lies about Labour's proposals for a Scottish Parliament? We have met business people and put our views to them; it has been accepted that there will be no change in corporate taxation, in the framework of financial regulation or in banking regulation. Does not the Conservatives' peddling of crude nationalism damage Scottish business? Do not they realise that decentralisation and the establishment of a Scottish Parliament will stimulate investment in Scottish industry, and do something for the 2,000-odd unemployed people whom the Government have put on the scrap heap?

Mr. Lang: I note that the hon. Gentleman asked that question, rather than his hon. Friend the Member for Hamilton (Mr. Robertson), whom I invited to answer a question that I had asked him in writing. I also note that, in his long diatribe, the hon. Gentleman did not answer the specific points that I put to him. Will the Labour party abolish the uniform business rate in Scotland? Will it abolish capping? Will it allow business rates to run riot as they did in the past, and will it impose high income


tax rates on the people of Scotland through a Scottish Parliament? If the Labour party does that, it will drive away business and drive up unemployment.

Mr. John Marshall: When he meets business leaders, does my right hon. Friend encounter any enthusiasm for a national minimum wage or the adoption of the social chapter? Does he agree that the business community realises that, while Labour may promise to freeze corporation tax, that would merely mean a tax-raising assembly having to increase the burden of taxation on individuals in business?

Mr. Lang: My hon. Friend is right. I have found no enthusiasm whatever in the business community for either the social chapter or the minimum wage—or, indeed, for the Scottish Parliament itself. Business men who are realistic and live in the real world are well aware of the huge burdens that it would impose on Scotland, making it the highest-taxed part of the United Kingdom and driving away both inward and existing investment.

Deep-mine Coal Industry

Ms Rachel Squire: To ask the Secretary of State for Scotland if he will make a statement on the future of the deep-mine coal industry in Scotland.

Mr. Stewart: Following the successful privatisation of British Coal, the future of the deep-mine coal industry in Scotland lies with the private sector. The Government believe that privatisation is the key to achieving our aim of securing the largest economically viable coal industry in the longer term. I wish Mining Scotland Limited every success.

Ms Squire: Does the Minister agree that it is vital to the future that he has just outlined for the pumping operations at Frances colliery in Fife to continue, both to allow a full economic appraisal of the colliery's coal reserves and potential and to prevent widespread ecological damage to wide parts of Fife? Will the Minister press the President of the Board of Trade and the licensed coal board, or its successor, to meet the cost of such pumping operations to allow a full examination of the economic and ecological issues?

Mr. Stewart: That is primarily a matter for the river purification board. I understand that the board has written to British Coal asking about its intentions in regard to continued pumping at Frances and, indeed, at Michael colliery.

Highlands and Islands

Mr. Macdonald: To ask the Secretary of State for Scotland if he will give his assessment of the prospects for economic growth in the highlands and islands in 1995–96.

Lord James Douglas-Hamilton: As a result of the Government's economic policies, the prospects for continuing growth towards long-term prosperity in the highlands and islands look very encouraging.

Mr. Macdonald: Does the Minister understand the disbelief and dismay in the highlands at the fact that, although the European Community has designated the highlands an objective 1 area—recognising that it is one of the poorest and most disadvantaged areas in the Community—the Government are imposing a spending

freeze on local authorities, forcing them to cut their spending plans and basic services and to propose steep increases in council tax? How can it be right for the European Union to give to the highlands with one hand while the Scottish Office takes with the other?

Lord James Douglas-Hamilton: Grant-aided expenditure for the Western Isles in 1995–96 is £44.6 million, a 3 per cent. increase over the year before. Highlands and Islands Enterprise is being funded to the extent of £77 million. There are many exciting projects in the hon. Gentleman's constituency, not least of which is the extension to Callanish Pharamceuticals, which the hon. Gentleman knows well. I am aware that Western Isles wants a number of objective 1 projects to be included.
Geographical targeting will apply to four programme priorities across a number of sub-areas of the highlands and islands. That will be achieved by determining a minimum level of resources to be allocated to each sub-area over the six years of the programme. There has been some good news for the hon. Gentleman's constituency about ferry services between Harris and North Uist. The hon. Gentleman is aware of that, and we shall not forget his interest in the matter.

Sir Russell Johnston: Will the Minister be so kind as to explain how the cancellation of motor-rail services in Scotland, which carry 20,000 cars a year, many of them from abroad, and the reduction in sleeper services, in particular the cancellation of the service to Fort William, are beneficial to the economic growth of the highlands?

Lord James Douglas-Hamilton: The hon. Gentleman asks a relevant question. I attended a meeting yesterday between my right hon. Friend the Secretary of State and the chairman and chief executive of British Rail. Those services are important for tourism and concern was expressed. British Rail is now continuing to examine options for Carlisle and Fort William sleepers. Options for motor-rail are still being examined. We shall remain in close touch with those who are involved in making the decisions, and I shall bear in mind the hon. Gentleman's interest in increasing tourism in his constituency.

Entertainment Clubs

Mr. Foulkes: To ask the Secretary of State for Scotland if he will consider introducing legislation to license entertainment clubs in Scotland.

Mr. Stewart: The Licensing (Scotland) Act 1976 requires an entertainment licence to be obtained from the local licensing board where alcohol is to be sold for consumption in a place of public entertainment during the permitted hours. In other circumstances, controls may be exercised under section 41 of the Civic Government (Scotland) Act 1982, which enables local authorities to require places of public entertainment in their areas to be licensed.

Mr. Foulkes: I am grateful to the Minister for that helpful answer. Does he agree that there is a serious gap in the law in that the Hangar 13 club is allowed to operate in spite of the fact that there have been a number of prosecutions for drug dealing at the club? Secondly, on a cross-party basis, Kyle and Carrick district council has voted to withdraw the liquor licence. Thirdly, there is now


a fatal accident inquiry into three tragic deaths at that venue. Is not it a mockery of the law that the club is allowed to operate as if nothing had happened?

Mr. Stewart: Of course, I entirely accept the hon. Gentleman's concern about Hangar 13. On, I think, 22 November last year, Kyle and Carrick licensing board resolved to suspend the licence on the grounds that the use of the premises caused undue public nuisance or a threat to public order or safety. We are considering whether it would be helpful and practicable to promote model conditions in licences for raves. We shall consult local authority licensing boards and police interests on that.

Gaelic

Mr. Flynn: To ask the Secretary of State for Scotland what proposals he has to increase the teaching and use of Gaelic.

Lord James Douglas-Hamilton: Government financial support for the Gaelic language has risen from £60,000 in 1979 to £11.1 million in the current year. Census figures, however, indicate that the number of people who could speak, read or write Gaelic fell from 80,000 in 1981, to 69,000 in 1991. Tha mi an duil ar planaichean air foghlam Gaidhlig fhoillseachadh a dh'aithghearr. As you may know, Madam Speaker, that means that I hope to announce our plans in Gaelic education shortly.

Mr. Flynn: The most moving moment of last year was when a psalm was sung in Gaelic in an Edinburgh church. Was not that moment shared by everyone in the British Isles? Does not the Minister agree that Gaelic and all the other Celtic languages are a great heritage and living treasure and are not the exclusive property of any one single area, political party or religion? They are the property of all of us who live in the British Isles. They are to be cherished, protected, spoken and sung.

Lord James Douglas-Hamilton: I was indeed at the service for the late John Smith and the rendering of Gaelic was singularly impressive on that occasion. Gaelic is one of the special features of Scotland's cultural heritage and the whole country benefits directly or indirectly from the richness provided by an additional indigenous language. We have a good record in that, with the extension, we have doubled the size of the structure of the Gaelic college on Skye. The college is very much a centre of excellence, benefiting the Gaels in north-west Scotland.

Mr. McAvoy: The Minister should be aware of Strathclyde regional council's excellent record in encouraging Gaelic education by providing special classes and extra resources. Does he agree that the foolish and vindictive abolition of that council puts at risk the development of Gaelic as an alternative language in Scotland?

Lord James Douglas-Hamilton: No, I do not agree with that. Borders regional council is one of the smallest in Scotland, yet it has high standards in teaching. We are considering carefully the inspector's report on the north-west highlands, where Gaelic is spoken, because it has identified a need to increase the number of Gaelic teachers. Problems exist in small schools in remote areas of the north-west highlands.

Housing Capital Expenditure

Mr. Chisholm: To ask the Secretary of State for Scotland what is the percentage change in net housing capital expenditure between 1994–95 and 1995–96.

Lord James Douglas-Hamilton: Reflecting the growth in owner-occupation, planned net provision for housing revenue account and non-HRA capital expenditure, together with the Scottish Homes development programme, falls by 2.3 per cent. between this year and next. Gross provision is, however, a more realistic measure of the resources available to spend on housing, and on the same basis falls by only 1.0 per cent. Within that, total provision for local authority capital expenditure on its own stock, and the resources for the Scottish Homes development programme remain at broadly this year's levels.

Mr. Chisholm: Why, in a year of cuts, has the most savage blow once again fallen on the housing budget? Will the Minister admit that, if we go forward three years, the real terms cut, even in the gross housing budget, will be 17.5 per cent.? Does not he understand that the homeless cannot wait while money for new building is postponed? Does not he recognise that people living in inadequate housing in my constituency want a speeding up, rather than a slowing down of modernisation programmes and of other improvements?

Lord James Douglas-Hamilton: Gross capital expenditure per house in the public sector is at its highest level and is projected to rise—it is £650 in the current year. Of course, £2.8 billion will be spent on housing in the next three years. Scottish Homes is expected to provide 2,500 units. It has provided impressive work in Muirhouse, which I recently visited and which is in the hon. Gentleman's constituency. It is bringing back into use many more rented houses, which will help the hon. Gentleman's constituents.

Mr. Ian Bruce: Has my hon. Friend had the opportunity to compare the figures for Scotland with those for England and Wales? Will he comment on the very good settlements for Scotland? Especially as we are considering the possibilities of further devolved government in Scotland, would it be helpful to the House if all statistics for Scotland were related to England and Wales, so that we could find out whether Scotland is getting a good deal out of the Union?

Lord James Douglas-Hamilton: There is much higher public expenditure per head across the range of identifiable subjects—that is beyond dispute. Obviously, we must ensure that resources go where they are most needed. As 300,000 public sector houses in Scotland have been sold to sitting tenants, we cannot expect to spend the same funds as we would have if those 300,000 houses had remained in the public sector.

Emigration

Mr. David Evans: To ask the Secretary of State for Scotland how many Scotsmen emigrated to England in the years 1975 to 1979.

Mr. Lang: Information is not available on migration to England alone. However, between mid-1975 and mid-1979, net migration from Scotland to the rest of the United Kingdom was approximately 5,000 persons


annually. From 1989 to 1994, there has been an average net migration to Scotland from the rest of the United Kingdom of 8,000 per annum.

Mr. Evans: I thank the Secretary of State for that reply. Could he tell me whether, with this devolution nonsense and the break-up of the United Kingdom that that lot over there want, which will mean that the Scots will pay approximately twice as much direct taxation as the English, he is planning to rebuild Hadrian's wall? Is he prepared to introduce work permits for Scots who want to work in England when all this nonsense takes place? Is he planning to take on the sacked governor of Parkhurst to look after the wall so that that lot cannot get into England to take English jobs?

Mr. Lang: My hon. Friend is right to draw attention in his customary way to the anomalies that would arise were we ever to be so unwise as to weaken Scotland's place in the Westminster Parliament by setting up in Edinburgh a separate Parliament with tax-raising powers. Just as emigration was high under Labour but has moved in the

opposite direction under Conservative Governments, so, too, under a future Labour Government, there would be a mass exodus from Scotland.

Dr. Reid: Does not the question reveal the contempt in which the hon. Member for Welwyn Hatfield (Mr. Evans) and his colleagues hold more than 50 per cent. of the population of Scotland in that it deals exclusively with the Scotsmen who emigrated during those years? Is not it a testimony to the foresight and perception of Scotsmen and women that, in the years before the Tory Government, the threat of such a Government forced so many thousands of them between 1975 and 1979 to leave the land that they love? Can we not now take heart from the prospect of a Labour Government which will allow many thousands of Scots throughout the United Kingdom to return happily to the land that was once their own?

Mr. Lang: The hon. Gentleman is obviously wriggling but the fact is that under socialism people left Scotland in very large numbers; under Conservative Governments they have been coming back in very large numbers.

Points of Order

Mrs. Alice Mahon: On a point of order, Madam Speaker.

Mr. Nick Hawkins: On a point of order, Madam Speaker.

Madam Speaker: Order. I can hear only one point of order at a time. The hon. Lady was on her feet first.

Mrs. Mahon: You will be aware, Madam Speaker, that Friday 27 January is the 50th anniversary of the liberation of the Nazi death camp at Auschwitz. Have the Government said what the House is going to do to commemorate the holocaust, and who will represent them at the memorial service at Auschwitz in Poland on Friday?

Mr. David Winnick: Further to that point of order, Madam Speaker. These camps were, of course, the scenes of mass extermination on a scale that the world had perhaps never known. The 50th anniversary of the liberation of the camps—especially that at Auschwitz—should concern us, as Britain was in the war against Nazism from the very beginning. In the circumstances, is it not inappropriate—I put it no more strongly than that—that the House is not being represented in any way?
I hope that I shall not be misunderstood if I say that, not only would we have liked the House to be represented, but that we hoped that you, Madam Speaker, would have been authorised—clearly, you could not do so without such authorisation—to represent us, so that people in Poland and the international community know that the House of Commons is concerned about what happened, and that we shall never forget the millions of people who were murdered for no reason other than their race, politics or some disability which, in the eyes of the Nazis, meant that they should be put to death.

Madam Speaker: I understand the sentiments, which, I am sure, are those of the entire House on this matter. The hon. Lady mentioned 27 January. I have not been informed by the Government that they intend to commemorate that date, but I remind the House that we have business questions tomorrow and that the matter could perhaps be put to the Leader of the House.

Mr. Hawkins: On a point of order, Madam Speaker. I wonder if you would give me your guidance? I think that it is correct to say that you have repeatedly made it clear that, in any Question Time, especially in Prime Minister's Question Time, interventions should always be in the form of questions.
I wonder, therefore, in the light of that confirmation, whether you would kindly look at column 136 of Hansard yesterday and the second intervention of the right hon. Member for Sedgefield (Mr. Blair), which certainly was not a question but a statement? Would you be inclined to remind the right hon. Gentleman of his obligation, above every other Member of the House, to put questions and not to make statements?

Madam Speaker: Yes, I think it is incumbent on any hon. Member, whether Front Bencher or Back

Bencher, not to make statements, but to put their questions to Ministers very briskly, so that as many hon. Members as possible may be called. I should also remind Members, especially Back-Bench Members, that, at Question Time, the Government are required to account for their policies, so questions must relate to ministerial responsibility and not go further afield. I am glad that the hon. Gentleman raised the earlier point with me.

Several hon. Members: Further to that point of order, Madam Speaker.

Madam Speaker: Order. I have dealt with that. I will not take any points of order further to it. There are other hon. Members wishing to raise points of order.

Mr. Kevin McNamara: On a point of order, Madam Speaker. You will recall that, on 13 July, the Government made a statement on their White Paper "The Civil Service: Continuity and Change", that the statement took 55 minutes, and that over 30 hon. Members took part. It now transpires that, in a written answer that is to be tabled tonight, the Government will slip out their reply to a Command Paper and to the Treasury and Civil Service Select Committee report.
This is a deliberate attempt to pre-empt the Scott committee and Nolan committee reports. Therefore, would you make representations to the people involved, to see that a statement is made in the House, that the Paper is delayed until then, and that the statement is not made in Opposition time?

Madam Speaker: The House knows my views on those matters. I have stated them clearly and frequently. Important Government decisions must, of course, be communicated first to this House. I feel very strongly about that, and wish to see it carried out. Whether that is done by oral statement or by written answer is for the Minister to decide, and I have no authority over that decision.

Mr. Paul Flynn: On a point of order, Madam Speaker. Have you seen, in your official capacity, the distressing account of the death of Mr. Keith Abel, who was described by his wife as a valiant servant of the health service and who spent many years of his life saving the lives of others? He had to wait five hours, during which he was dying of a brain haemorrhage, while efforts were made to find a hospital. Five long hours went by, and no hospital could be found to deal with him. Have you had a request for a statement about that incident and the distressing state of our national health service?

Madam Speaker: I received no intimation from the Government that a statement was to be made on that matter today.

Mr. Dennis Skinner: On a point of order, Madam Speaker. I know that we have had Scottish questions, but I wonder whether the Government have requested that one of their Ministers could make a statement on their new policy, and whether they have informed you about their declaration last night on television regarding the new laws on Sunday opening hours, especially in view of the fact that we know that the Tories have been hunting for money and that the


brewers are very happy about the proposals? I should like to know why no statement has been made, because I want to ask the Ministers concerned how much the brewers have promised the Tory party for this change of policy that has not been announced in this House.

Madam Speaker: That is barely a point of order for me. The hon. Gentleman may try to use the Order Paper to put those questions to Ministers. He was really asking whether the Government are making a statement on that matter today. The answer, as far as I am concerned, is no.

Mr. George Foulkes: rose—

Madam Speaker: I hope this does not relate to earlier points of order; there was a glint in the hon. Gentleman's eye as if it did.

Mr. Foulkes: It is an absolutely and completely different point of order, Madam Speaker. You may recall that, two weeks ago, you gave a very helpful answer to a point of order that I raised indicating that all questions must relate to responsibilities of Ministers, so that Conservative Members could not ask questions about the Labour party and Labour policy. Does that mean that I would be precluded from asking whether the costs of the legal action against The Guardian by the director-general of the Tory party will be paid for out of Tory party funds or out of Government funds?

Madam Speaker: The hon. Gentleman must not try to use the Chair of this House to put questions of that nature. He is ingenious enough, and has been here long enough, to know his way around the Order Paper and to know how to raise issues. I guessed correctly—he had a twinkle in his eye before he started.

Mr. David Jamieson: On a point of order, Madam Speaker. Have you received any representations from the Government making their position clear concerning the reports that, shortly after leaving Government service, many senior civil servants from the Ministry of Defence, and many people who have held very senior positions in Her Majesty's armed services, receive directorships and arrive on the boards of

defence companies managing large orders for the Government? Have you received any representations on that subject, Madam Speaker?

Madam Speaker: The answer is no.

Dr. Norman A. Godman: Is it your intention, Madam Speaker, to continue the practice of calling Conservative Members more than once during Scottish questions?

Madam Speaker: Yes, but not on every occasion; that must be left to my discretion. I believe that the hon. Gentleman has raised that matter today because he rose several times at Question Time but I could not call him—I saw the look of frustration on his face. I say to him and to other Scottish Members that I keep a list of Scottish Members who have not been called very often during Scottish Question Time. The hon. Gentleman is not on my list, because I know that he has been called quite frequently; that is probably one reason why he was not called today. I keep the list here with me at every Scottish Question Time, and try to deal as fairly as possible with all Scottish Members, whatever party they may come from.

Several hon. Members: rose—

Madam Speaker: I hope that that will not give rise to other points of order.

Mr. Phil Gallie: This is another point of order on Scottish Question Time, Madam Speaker. Did you take into account the fact that today we had extra time for Scottish questions because of the changes in the procedure of the House? I feel sure that that was welcome to all Scottish Members.

Madam Speaker: The hon. Gentleman gives me an opportunity to say that, at Scottish Question Time, we do not make the progress that I would like to see. We have made a little more progress today because of the extra few minutes, but I hope that we shall try harder next time.

Dame Elaine Kellett-Bowman: May one hope, Madam Speaker, that Scottish Opposition Members will remember that they are members of the United Kingdom, as are our much admired Members from Northern Ireland and from Wales?

Mr. Michael J. Martin: Oh—thanks for that information.

Madam Speaker: The hon. Member for Lancaster (Dame Elaine Kellett-Bowman) always has something to say that is welcome in the House. We shall now move on to the ten-minute rule Bill.

Pensions (Divorce)

Mr. Harry Cohen: I beg to move,
That leave be given to bring in a Bill to amend the law so as to provide for the equitable division of pensions in the event of divorce.
I introduced this Bill at the end of the previous parliamentary year, on 1 November, but because that happened at the end of the Session, it fell and it was not even possible to publish it. I hope to make better progress this year. I do not wish to restate all the provisions of the Bill, as they were contained in my speech of 1 November and can be read in Hansard, but I shall restate its main purpose and principles.
The Bill seeks a fairer distribution of assets, especially pension assets, in the event of divorce. The current system is unfair, because at present most pension fund rights are personal to the individual in the fund. On divorce, husbands often walk away with all the pension assets, while wives get nothing. One has a prosperous future; the other faces hardship.
In England and Wales, the decision whether to include pension rights in an overall settlement is entirely at the discretion of the court. More often than not, the court ignores those pension assets, either because they are not brought to its attention or because it comes up against the obstacle in the current law that it cannot overrule pension fund trustees and divide an individual's pension assets.
That is not the case in Scotland, Germany, Canada and elsewhere. In those countries, all assets, including pension assets, are considered as comprising the matrimonial assets, and divided equitably. That is what my Bill seeks for England and Wales.
The court would have the power to reallocate occupational and personal pension rights between the divorcing parties. It could arrange for a transfer payment from the pension fund member's account to the account for the benefit of the divorced spouse. She would then have a pension in her own right.
On "Women's Hour" last month, there was a statement from the Minister's office about that matter. It repeated the assertion that there is no clear evidence of the problem, that more research is needed, and that a survey had been commissioned to report at the end of 1995. That sums up the Government position.
I disagree—there is plenty of evidence. Two major reports have said that there is a strong case for a change in the law—that of the Pensions Management Institute in May 1993 and the Goode report in September 1993. The National Association of Pension Funds has added its weight in favour of a revision of the law.
The organisation Fair Shares says that it has counseled many more than 1,000 women in that situation, many of whom are desperate and forced to depend on the state against their will. Fifty-two per cent. of the organisation's members have no pension rights, in spite of having been married for a long time. Others, who receive the family house in a divorce trade-off, also receive the outstanding mortgage, and find themselves trapped on income support, with the permanent threat of losing that house.
"Women's Hour" gave some examples. One was of a 72-year-old disabled woman, who was married for more than 40 years. Her ex-husband receives a £25,000-a-year pension. He pays her £4,000 a year, but she is deeply

anxious that, when he dies, her maintenance will end and she will be left destitute. Another woman described that general denial of pension rights as a "double betrayal"—first by her partner, then by the law.
There is plenty of evidence in my mail of the problem; I have received many letters about the subject. Mrs. M of Devon wrote:
I knew my husband for 50 years and we were married for 45 years…During the
divorce proceedings, his company
would not divulge his pension rights.
He paid up at first, but soon after, he remarried and the money was stopped.
Mrs. K of Bedfordshire was married for 32 years and, similarly, her husband stopped paying maintenance. She writes:
I have no savings whatsoever. Just what does one do? Fall back on the State?
Mrs. P of Essex was married for 20 years. She says:
My husband has informed me he intends to leave me…to buy a bigger boat and live on that by himself. I asked about his pension and whether he
would give
me half…He said there is no way he will pay me any of his pension. This pension will amount to tens of thousands of pounds…plus a sizeable monthly income. Indirectly I feel I have been paying towards that pension but legally have no rights or access to it whatsoever. His financial future is assured. Mine holds nothing but question marks and fright".
Mrs. W of Essex said:
I divorced my husband after 31 years of domestic violence, mental cruelty and also living with a husband who was a pervert.
It is the same story—she then had no rights to his pension.
Mrs. M of the Isle of Wight, married for 43 years, with five children, went to court to obtain her pension rights and found herself denied legal aid. When she applied, she was refused, on the grounds that
your prospects of deriving any benefit from defending the
divorce
petition are too slight to justify the issue of a certificate.
Her husband, incidentally, with a larger pension, obtained his legal aid for the proceedings.
After 27 years of marriage, Mrs. L of Truro lost her pension rights under the existing law. She states:
Through no fault of my own I now face a future of emotional and financial insecurity…In Scotland and in several other countries the courts have the power to divide a pension on divorce, and recent reports have urged the Government to alter the law in England and Wales to grant women their fair share of the pension to which they have contributed in kind. My experience shows that the courts cannot be relied upon to use the powers embodied in the Matrimonial Act to protect women in my situation. There is no substitute for an index-linked pension".
There is plenty of evidence, and it is crystal clear—the Government must know that.
The Government's survey, which is to report at the end of 1995, merely kicks the matter into touch for another decade. The Pensions Bill is before Parliament this year. If the change is not made now, there will not be another Bill and another opportunity for many years. I understand that an amendment to the Bill is to be tabled in the House of Lords and that it will be supported by peers from all parties. In the interests of fairness, I urge the Government to accept such an amendment and such a change.
In my last few seconds, and as it is Burns night, I thought that I would quote a bit of Burns, like the true cockney I am, and tell the Government not to be a
Wee, sleekit, cow'rin', tim'rous beastie,
and accept the legislation, so that
Should auld acquaintance be forgot,
it can be a case of
O, gie the lass her fairin', lad".
Question put and agreed to.
Bill ordered to be brought in by Mr. Harry Cohen, Mr. Tony Banks, Mr. Malcolm Chisholm, Mr. Jeremy Corbyn, Ms Jean Corston, Mr. Neil Gerrard, Ms Mildred Gordon, Mr. Bernie Grant, Mrs. Helen Jackson, Mrs. Alice Mahon, Ms Clare Short and Mrs. Audrey Wise.

PENSIONS (DIVORCE)

Mr. Harry Cohen accordingly presented a Bill to amend the law so as to provide for the equitable division of pensions in the event of divorce: And the same was read the First time; and ordered to be read a Second time upon Friday 24 February, and to be printed. [Bill 38.]

Orders of the Day — Finance Bill

(Clauses Nos. 2, 5, 8, 15, 52, 64 and 91, Schedules Nos. 1, 4, 11 and 14, and any new Clauses first appearing on the Order Paper not later than 19th January and designed to continue the statutory effect of any of the Ways and Means Resolutions of the House of 13th December)
Considered in Committee [Progress, 23rd January].
[MR. MICHAEL MORRIS in the Chair]

The Financial Secretary to the Treasury (Sir George Young): On a point of order, Mr. Morris. I wonder if it would be for the convenience of the Committee if we were to take clause 64, schedule 14 and the associated amendments together?

The Chairman of Ways and Means (Mr. Michael Morris): Is it the wish of the Committee that we take the clause, schedule and amendments together? It seems that it is, and the Chair is happy to assist in that.

Clause 64

APPROVAL OF COMPANIES AS TRUSTS

Mr. Andrew Smith: I beg to move amendment No. 15, in clause 64, page 57, line 44, at end insert—
'(1A) No approvals shall be given under this section after 6th April 1997.'.

The Chairman: With this we shall take schedule 14 and amendment No. 11.

Mr. Smith: Our difference with the Government is not on the importance of investment, especially for smaller and higher risk companies. We have argued long and hard that the Government should do more. A form of venture capital trust properly put together could have a role in that. Our strong concern is that the way in which venture capital trusts are designed in the Bill and the manner of their tax treatment will not provide the stimulus to the right sort of investment in an efficient way.
If the scheme goes ahead, the Government will find—as they did with the business expansion scheme—that they end up using taxpayers' money to subsidise many low risk investments backed by property, primarily for tax avoidance purposes. Given the business expansion scheme experience, we have to ask why the Government are bringing forward a venture capital trust scheme in this way—with no explicit exclusion of property companies and only limited exclusions of property-backed companies.
When I saw in yesterday's Financial Times that the Chancellor of the Exchequer was considering flogging off the Treasury, I thought that I saw a connection—perhaps venture capital trusts will be used to market the Treasury itself. I can see the glossy venture capital trust prospectus now: "Invest in a prestigious central location. Buildings rather tarnished by present occupants. Fake blood to be removed from office of the Chief Secretary to the Treasury. Real beer to be removed from the floor of the


Chancellor's office. Excellent potential in an exciting project to be under new dynamic management within two years".
The tax breaks in the scheme are huge. Compelling though the case for assisting in flogging off the Treasury may be, we have to ask how the cost can be justified. The Government estimate that venture capital trusts will cost the Exchequer almost £700 million over three years. The House is right to ask how the Government can justify huge tax breaks to facilitate investment, including some very safe investment. The answer is that they cannot.
As I will set out in my speech, there is every prospect of venture capital trusts as designed in the Bill and defined in the clause becoming a monumental tax avoidance device, stimulating the business of the tax planners more than that of the companies which the Government claim that they are trying to help.

Mr. John Butterfill: I am grateful to the hon. Gentleman for giving way and I am sorry to interrupt so early in his speech, but I should like to clarify his thinking for the convenience of the Committee. I fully understand his concern about the absence of an interest-in-land rule in the proposals before us, but apart from the opportunity for what might otherwise be safe investment, would the Opposition support the principle that some tax advantages—such as roll-over relief and the freedom from ultimate capital gains tax—should be afforded to encourage venture capital investment?

Mr. Smith: Later in my speech I shall propose some ways in which the Opposition believe that that concept could be applied more successfully. We have never argued that there is no case for fiscal incentives in investment. Indeed, we have advanced that case very vigorously in relation to much-needed investment in research and development. It is a question of weighing properly and realistically the balance between the cost to the Exchequer of the tax subsidies involved and the actual gain to the public through stimulating beneficial investment. Because of the nature of the tax breaks within the scheme and the property exclusion to which the hon. Gentleman referred, we do not think that the proposal gets the balance right.
We believe that the Government should at least concede that there are risks involved in embarking on this scheme. They should have learnt from the experience of the business expansion scheme. It is wise to propose a sunset provision in the legislation, as Opposition amendment No.15 does, so that Parliament can re-examine the operation of the scheme after two years. We can then assess whether the cost of the tax relief involved has been justified by the additional capital invested in genuinely high risk but potentially productive and profitable enterprises. It is important to invest capital in high risk ventures, but we want those ventures to have at least some probability of success; we do not want to squander taxpayers' money. Past schemes, such as that involving DeLorean, were not always a wise use of economic resources and taxpayers' money.

Mr. Nigel Forman: The hon. Gentleman was implying that it would be sensible to form a judgment on a company's prospects after two years, when it has been involved in the risky enterprise

that one assumes would be the frame for a venture capital trust. Realistically, does he think that two years is sufficient time for that judgment?

4 pm

Mr. Smith: I take the hon. Gentleman's point. Even if, after two years, it seemed sensible to allow the scheme to continue, further evaluation would still be needed. After two years, however, it would be clear whether the Government are right in their contention that the scheme will direct savings into high-risk, productive industrial enterprises, backing up entrepreneurs who are currently short of capital or whether, as we feel, it is likely to divert savings from other investments.
The terms in which the venture capital trust is structured are such that within the parameters of the scheme the influx of funds will gravitate towards the low risk investments which the limited exclusions facilitate. That judgment could be made after two years. We would then be able to assess the balance of costs and benefits and a proper evaluation could be made of what benefits there are, who gets them, and the considerable costs involved.
The Government must face the issue squarely. The tax breaks are enormous: it appears that either the Government have made a major blunder in the way in which the scheme has been designed, or they want to give money away.
Let us consider how the definitions in the clause will work in practice. Those putting money into the scheme will not pay tax on the dividends that they receive up to a limit of £100,000 invested per year, and they will not pay tax when they sell their shares in the venture capital trust. Indeed, it is worse than it first appears. It does not just mean that investors can get up to £100,000 back from the trust in any one year and pay no capital gains tax; it means that everything is free of tax, including the return on the £100,000 invested per year. If the £100,000 yields a £150,000 return, there would be no capital gains tax on the extra £50,000.
Investors can claim tax relief at 20 per cent. in any one year on up to £100,000, provided that the shares are held for five years. A 40 per cent. taxpayer can thus avoid tax of up to £20,000 by putting in the maximum £100,000. So long as an investor has income of £100,000 or more, as the increasing number of privatised utility profiteers do, they need invest only £80,000 after tax because the Inland Revenue will contribute the other £20,000.In total, if the shares purchased in the venture capital trust yield a 50 per cent. growth over five years, for the expenditure of £80,000 of post-tax income the investor will get £150,000 back with no tax to pay and no tax on the dividends received in the meantime.
Even that is not the end of it: investors can also use the venture capital trust to defer capital gains tax. A 40 per cent. taxpayer could sell assets—perhaps in shares or property—with a capital gain of £100,000, put that gain into a venture capital trust and thereby defer the capital gains tax of £40,000. The gain, at least in theory, would he liable to taxation when it was withdrawn from the trust, but there would be nothing to stop the investor reinvesting the money, perhaps in another venture capital trust, further to shelter it.
If the Government want to establish a scheme whereby they are not taxing income which goes into saving—and academics argue that it is an intelligent direction in which


to point the taxation system—they should do so in a way which enables everyone to take advantage of the provisions and not simply gear them towards venture capital trusts and other investment schemes which are particularly beneficial to a minority of very wealthy people.

Mr. Butterfill: I am sure that the hon. Gentleman appreciates that the Government are trying to encourage investors away from existing investments that are safe but are not producing the results we want and towards risky entrepreneurial activities. The investor could defer that liability just as long by leaving the money where it is. Provided that he does not realise his existing assets, he can defer liability indefinitely. He is not being offered any real advantage, other than the incentive to move his money from something safe and unproductive to something less safe but, one hopes, more productive.

Mr. Smith: I answered that point earlier. Our fear is that the scheme will provide an opportunity to move investment from something safe and unproductive not to something high-risk and productive with tax advantages, but to something equally safe and unproductive offering a much higher rate of real return because of tax breaks. That cannot be right.
The scheme offers huge tax breaks when the money goes in, with relief from income and capital gains tax; breaks when the money is in the trust, when dividends are not taxed; and tax relief when the money comes out, with relief on capital gains. It is no wonder that Mr. John Speirs, director of BES Investments and a leading adviser on business expansion schemes, stated in The Sunday Times on 4 December 1994:
I cannot see why anyone should pay capital gains tax again…If we had written it ourselves we could not have come up with a better Budget for the tax shelter industry.
He did not say "a better Budget for high-risk, productive small companies.
That damning indictment of the Government's scheme is anything but an isolated comment. The savings and investment press is full of more of the same. On Second Reading, I quoted from the excellent publication, Small Company Investor. Perhaps the Financial Secretary will say whether he has yet adopted my advice and taken out a Treasury subscription to that magazine, which gave a commendably informative guide to the real consequences of the Government's proposals. It published a feature headlined:
Life is just a bowl of tax cherries. Will you need to pay capital gains tax again? Maybe not.
Another article in the same issue asks:
What has our Chancellor, Kenneth Clarke, been doing to turn our smaller company investment dreams into a reality? How could he get his budget so right—
the Committee can tell that I am not quoting selectively—
and yet so horribly wrong? No, not the VAT on fuel blunder, but the tax relief for smaller company investment. He did what was needed to pump up investment by making the reliefs huge—and then he took some of it away by dragging in property. Isn't that just what happened with BES? Our bet is that there will be an avalanche of lower-risk, property-backed schemes taking money away from entrepreneurial small companies.

That is precisely the opposite effect that the Government claim. It added:
Think again Chancellor.
Such comments are not confined to the savings and investment press. A number of academics have reached similar conclusions. A report produced by the SME centre at Warwick university and published by the Government entitled "An Assessment of Firms Located On and Off Science Parks in the United Kingdom" stated:
Other options which have been suggested for overcoming the financing problems which developing high technology businesses claim to experience include:
The establishment of venture capital funds which would focus exclusively on the high tech sectors. Such funds, however, have been established in the past without achieving significant success.
It continues:
Additional tax support for business angels. The introduction of the Enterprise Investment Scheme could be seen as a satisfactory development in this light. However, other research casts doubt upon the use of taxation incentives in inducing desirable changes in this area.
In a study sponsored, I understand, by the Department of Trade and Industry and others and entitled "Understanding the Small Business Sector", the author, D.J. Storey, an acknowledged expert on these matters, said:
The research evidence suggests that government has to look very carefully at proposals to use the taxation system to provide `incentives' to modify the behaviour of individuals who own small businesses. Currently, it is unanimously recognised that small business owners have to invest more heavily in their own businesses rather, than being excluded from doing so, as was the case with the BES. For example, research evidence consistently shows that individuals who do not reinvest sufficiently in their own businesses run a much higher risk of business failure. However, the history of BES is one of desirable objectives of small firm policy being the focus of taxation exemption, for these only to be used as tax avoidance vehicles. Our recommendation would therefore be to avoid, wherever possible, the use of the taxation system to provide incentives in this area. Instead we feel that government would be best advised to use its powers of persuasion, possibly through collaboration with banks and accountants, to emphasise the investment message. The message that excessive withdrawals from the business are likely to lead to its failure has to be drilled home to small business owners, rather than emphasis being on the provision of tax breaks for the wealthy.
That gives a wider perspective of the context in which VCTs are being introduced and their likely effect on the small business sector. Unlike the Government, Labour believes that such comments should be taken seriously, and that a measured and careful approach must be taken to fiscal incentives of these types, although we acknowledge, as I have said, that a role can be argued for them.
Faced with the weight of comment and the quotations and analyses that I have cited, we believe that the Government must give some answers, rather than—as always—arrogantly expecting the public to accept that Ministers know best, especially when they patently did not know best about the business expansion scheme and other schemes which they subsequently had to return to the House to change.
It was revealing that, when the Financial Secretary replied to the debate on Second Reading on Tuesday last week he had no answer to the charge that the form of VCTs that the Government are proposing will be used disproportionately for tax avoidance and tax sheltering. I expect that when the Financial Secretary replies he will


claim that the clause takes care of tax avoidance dangers. I am arguing that it does nothing of the sort. I accept that the clause excludes dealing in land, goods, banking and other financial services, some leasing business and legal and accountancy services, but most crucially of all it does not exclude, as I understand it, property-backed schemes. Similarly, it does not exclude elderly people's accommodation.
There is ready scope for abuse of the scheme for tax avoidance purposes, which will not provide investment in the high-risk productive businesses and manufacturing businesses that the Government claim for it. That is why we tabled amendment No. 16, which would have put limits on the way that property could be used to back companies qualifying for VCT relief. A Liberal Democrat amendment which would have the same effect has been selected for debate today. It seeks to stop schemes mainly backed by property from benefiting from the extensive tax reliefs of venture capital trusts. Both amendments—the Labour amendment which was not selected and the Liberal Democrat one which was selected—introduce into VCTs the same property restrictions that the Government felt that they had to introduce into the business expansion scheme and the enterprise investment scheme.
Given all that happened, particularly with the business expansion scheme, it is ironic that the Government propose to remove the safeguards from the BES and EIS in the Bill and not to introduce them into VCTs. What possible argument can there be for not ensuring the safeguards that the Government had accepted? Could it be anything to do with the fact that the property restriction is so unpopular with the BES and EIS tax planning industry? It is difficult to find any other reason why those safeguards should not apply.
Opposition Members believe in learning from experience and acting with a knowledge of the way in which markets have behaved, rather than planning simply on the basis of the way in which we might like to suppose that they would behave. If two investments have the same or similar return, investors will naturally tend to invest in the lower risk option. Their advisers will advise them to do just that. Experience shows that the tax planning industry can demonstrate great ingenuity in trying to create relatively low risk investments, often backed by property. We believe that the Government could and should create better mechanisms for ensuring that tax relief ends up supporting the financing of enterprises which generate the greatest value for the UK economy and which most need extra investment capital.
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As drafted, the schemes would also lead to a very complex structure which could produce some rather bizarre results. For instance, if someone bought a narrow boat and operated it as a holiday business, he or she could qualify for VCT tax benefits, but if they leased the boat to another person, who also operated it as a holiday business, that person would not qualify for the VCT benefits. If that person operated the boat as a holiday business for part of the year and leased it to someone who operated it as a holiday business for the remainder of the year, that person would probably end up in the High Court to determine whether or not he or she qualified for VCT tax benefits.
We should think about those things while the proposed legislation is before the Committee so as to avoid the complexity and the never-ending growth in the volume of tax legislation. [Laughter.] The Chief Secretary and the Financial Secretary laugh, but they are responsible for the volume of tax legislation. Nothing is more onerous to the small businesses that they claim to be helping than the huge volume of legislation and red tape for which the Government have been responsible.
I have a suggestion as to how the scheme can be changed and improved. The Labour party believes in listening to the real arguments and considering the real nature of the market with which we are dealing. It would be well worth the Government looking at the 50 per cent. rule, which requires that a VCT must hold 50 per cent. of its qualifying assets in the ordinary shares of unquoted companies.
Let us not forget that that requires small companies to give up a good part of control and equity to raise the funds they need. That is something that small businesses view with a great deal of apprehension. The fact that it is required reflects something of an obsession with equity in this country which contrasts with the tendency to fund through debt which is more prevalent among our successful European competitors and in the far east. There is a strong case for relaxing the 50 per cent. requirement so as to allow companies preferring to issue, for example, fixed rate securities, to benefit from the VCT advantages.

Mr. Butterfill: When the hon. Gentleman refers to ordinary shares, does he mean only ordinary shares or would he include preferred shares? He will know that the structure of many of the schemes is that the lending institution will take the preferred shares, leaving the ordinary shares with the entrepreneurial management. That structure enables them to give a larger proportion of the ordinary shares to the management, thereby giving a greater incentive to management than would otherwise be the case.

Mr. Smith: The hon. Gentleman draws attention to an important distinction. It is a useful point, but I was making the case for shifting from the 50 per cent. requirement of equity, of holdings in shares of whatever form, to the case for enabling the company requiring the capital to take it in the form of fixed interest securities, which would not involve that surrender of control. It was the importance of control from the perspective of the firm receiving the savings and making the productive investment that was of concern to me.

Mr. Tim Smith: Is the hon. Gentleman seriously suggesting that tax relief under the scheme should be extended from equity investment to fixed interest investment? Is that what he is saying? Surely that runs counter to what he was saying just now about risk. There is far less risk in investing in fixed interest debt, which takes priority over equity in a liquidation. Surely he is not suggesting that the risk should be reduced in that way.

Mr. Andrew Smith: I am saying that a comprehensive look at the scheme would lead to a number of the parameters which are operating being varied. The 50 per cent. requirement on shares is one of them. The case for reducing the tax breaks also bears examination. Rather than the definition that the Government are using, which is essentially that the scheme can be applied to anything


within certain broad terms and not on a list of exclusions, why not be more positive and say that the scheme will apply in the case of X, Y or Z or to those firms which satisfy the relevant criteria?
By taking a number of elements of reform to the package one could put together a form of venture capital trust which would more successfully achieve the Government's stated aim of ensuring that available savings went to the high risk companies which are investing particularly in manufacturing or undertaking research and development. The scheme as designed by the Government will not achieve those objectives.
Talking about venture capital trusts, the Financial Secretary said on Second Reading:
The Labour party is ill advised to come out against them at this early stage."—[Official Report, 17 January 1995; Vol. 252, c. 673.]
That seemed to imply that somehow we would be better advised to come out against them later when the hard earned money of middle and lower income taxpayers had been wasted in subsidies for tax avoidance by those with enough money to extract the maximum benefit from the trusts. The amendment gives us and the Government the chance to do just that.
If the Government will not look again at the schemes now, they should look again at them in two years as we suggest. They should look at them early in 1997, which may be just the time when the electorate is taking another—and final—look at the Government. If the Financial Secretary is so confident of his arguments, so confident of the public, economic and industrial benefits of the trusts as defined in the clause, he should have nothing to fear from such a mandatory review and should find it easy to accept the amendment. If he does not, we shall not only vote to try to make him do so and support the Liberal Democrat amendment to exclude property-backed schemes, a proposal that we also tabled, but we shall vote against this ill-judged vehicle for tax avoidance by voting against clause 64 in the Division Lobby.

Sir George Young: I hope that the Committee can be persuaded to resist the amendments.
The hon. Member for Oxford, East (Mr. Smith) began by saying that he supported the principles of venture capital trusts, but by the end of his speech he had so qualified his support that little remained intact. At one point he challenged the whole philosophy of using the fiscal regime and tax incentives to create fresh investment in new businesses. He focused almost exclusively on the relationship between the potential investor and the venture capital trust; he did not spend quite so much time examining the potential impact on supply-side change, job creation and investment in new and expanding businesses.
The hon. Gentleman asked me whether I had read a particular publication. I am not conscious of having done so. I recall that the last time the hon. Gentleman read out a list of publications held by the Treasury, he came across

one called "Baking Technology". That was a misprint: it should have been "Banking Technology". However, I understand the hon. Gentleman's surprise.

Mr. Andrew Smith: That does not stop the Treasury from cooking the books.

Sir George Young: My hon. Friend the Member for Beaconsfield (Mr. Smith) made a pertinent and perceptive point. Having criticised VCTs for being too safe for the tax breaks, he floated a suggestion that would have made them even safer by allowing more of the money to be invested in fixed-interest securities.
Let me try to put the debate in a slightly broader context. When my right hon. and learned Friend the Chancellor introduced the idea of VCTs in his 1993 Budget, he said that the biggest contribution that any Chancellor could make to reducing unemployment in the medium term was to ensure that the conditions were in place for new businesses to become established and for small businesses to grow. In the past year, through the industrial finance initiative, we have been examining savings and the flow of funds through the economy into the business sector. That initiative identified the shortage of equity and other long-term finance as one of the problems facing small businesses today.
The CBI has conducted its own surveys in the past few years. Those surveys have shown that there are difficulties in the raising of funds, particularly in the range of up to £500,000. Dr. Steven Abbott, in association with the London business school, has shown that the United Kingdom economy has the capacity to produce 20,000 potential "star" start-ups, but only half that number are created, and nearly half of those rely on "funding gap" finance, mainly short-term overdrafts and loans. The VCT scheme is one of the Government's responses to a problem that has been generally recognised by serious commentators.

Mr. George Stevenson: I do not think that anyone would deny that there is a shortage of capital, particularly in small and medium-sized businesses. When suggesting ways of dealing with that shortage, however, will the Financial Secretary bear in mind the failure of the business expansion and enterprise investment schemes, which use tax breaks for that very purpose?

Sir George Young: This scheme is more like an investment trust—it is quoted and pooled—than the business expansion scheme.
Having carried the hon. Member for Oxford, East with me so far, I hope that I can persuade him to stay with me for another paragraph or two. With respect to the hon. Member for Stoke-on-Trent, South (Mr. Stevenson), the VCT scheme is not a tax scam for the wealthy, as he likes to portray it. He misunderstands the contribution that it can make to supply-side reform, the expansion of successful firms and the creation of jobs. Fiscal incentives may be needed if we are to capture those benefits. That is why I said, and I repeat it now, that the Labour party was ill advised to come out so firmly against VCTs as proposed by the Government.
There has been an encouraging response to our proposals. Already, many people say that they are seriously considering setting up venture capital trusts, and


as far as I am aware none are focusing on nursing homes, granny farms or any of the other schemes mentioned by Opposition Members.
The main details of the scheme have been widely publicised. Investors who buy quoted shares in a venture capital trust will be able to invest in a spread of unquoted companies. That shows that it is very different from the business enterprise scheme which, by and large, was not quoted and consisted of single product schemes. Investors will be exempt from tax on dividends from the venture capital trust and from capital gains tax when they dispose of shares in the venture capital trust.
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If investors subscribe for new ordinary shares in the VCT, they will in addition be entitled to income tax relief at 20 per cent. provided that the shares are held for at least five years. They will also be able to defer capital gains tax on a chargeable gain which arises from the disposal of any assets where that gain is reinvested in the venture capital trust by that same subscription. There is a limit for tax relief on subscriptions of £100,000 a year.
Venture capital trusts must be quoted on the stock exchange and will enjoy the same exemption from corporation tax on capital gains as investment trusts. At least 70 per cent. of the investments of venture capital trusts will have to be in unquoted trading companies with not more than 15 per cent. in any one company or group of companies. Venture capital trusts may count investments of up to £1 million in any one unquoted trading company in any one year towards the 70 per cent. unquoted trading company requirement, provided that the gross assets of each company do not exceed £10 million before each investment. I am afraid that that knocks out doing the Treasury building under the ingenious scheme that the hon. Member for Oxford, East floated at the beginning of his speech. He will find that the sums involved are substantially in excess of £10 million.
Each venture capital trust may put up to £1 million a year in each company. The trust would be well advised to keep its eyes on rather more than 70 per cent. because it must not fall below that percentage. To put it another way, the legislation gives the VCT a 30 per cent. leeway for when it buys and sells investments.
The VCT may invest in most types of unquoted trading company but as the hon. Member for Oxford, East said, certain activities are specifically excluded. They are: dealing in land, commodities and other financial products; dealing in goods otherwise than in wholesale or retail distribution; banking; insurance; money lending; hire purchase financing, and so on; the leasing of assets or receiving royalties or licence fees; and providing legal or accountancy services.
That considerably reduces the scope for the venture capital trust scheme to be used for low-risk investment. Unlike the business enterprise scheme, it does not apply to investment in private rented housing companies. The VCT legislation follows the enterprise investment scheme legislation in providing for the Treasury by order—subject, of course, to Parliament—to amend the meaning of qualifying trades and the figures of £ 1 million and £10 million. That should give a measure of flexibility in running the scheme.
The theme of the speech by the hon. Member for Oxford, East was that the scheme would become a major tax break for the few. The Chancellor anticipated such

reactions in his Budget speech. Tax reliefs of this kind are designed to stimulate much-needed investment in business and enterprise and to create jobs rather than new tax loopholes. As I said on Second Reading, some firms have a high growth potential because they are able to benefit from innovations, but they are sometimes unable to get access to normal sources of finance through the stock market or the banks. That is because they have special characteristics which the financial system is unwilling or unable to accommodate, hence the funding gap which the industrial finance initiative has identified.

Mr. Andrew Smith: What evidence is there that the tax treatment of investment in those companies is the problem?

Sir George Young: The problem is the shortage of risk capital, of investors being unwilling to provide capital for such firms without some sort of fiscal incentive. Many serious commentators who have looked at that structural problem in the UK economy have been drawn to that conclusion.

Mrs. Helen Liddell: Does the Minister accept that there is a considerable problem in the venture capital industry, particularly in relation to small and medium-sized enterprises? There is a funding gap, and one of the reasons for that, the venture capitalists tell us, is that it costs as much to service a loan for a major management buy-out or for a major privatisation as it does to service one for a small or medium firm. Nothing in the Bill gives any hint that that gap will be filled in any way.

Sir George Young: The whole purpose of the clause is to reduce the cost of risk equity capital for small businesses. We are making it easier for those businesses to access the capital that they need. That is the thrust of the measures before the Committee this afternoon.
The proposals in the Bill are the result of the painstaking consultation that has taken place in the past year. It is a balanced package and it has been warmly welcomed. The Association of Investment Trust Companies has said that the scheme has a good chance of success in encouraging equity investment in small, unquoted companies. Rothschilds has said that the measures will nurture business in the United Kingdom food sector. Others have said that the trusts are imaginative and bold, and that the measures will bring investment in private companies within the reach of more investors. The challenge now is to secure that potential.

Mr. Clive Betts: The Financial Secretary has used one or two extracts from the comments of various commentators, who seem to commend the scheme because of its tax benefits. Given the calculations that are being done on the tax relief that is likely to arise from these measures, perhaps the Financial Secretary could say what sort of people on what sort of incomes will benefit from that tax relief. Will he give clear Treasury estimates of what sort of schemes will benefit, how much more investment will go into small manufacturing firms rather than into property schemes, and how many jobs will be created? Have those estimates been done or are we living in a vacuum?

Sir George Young: If the hon. Gentleman reads the publication that we put out on Budget day, he will find the best estimate that we can make of the take-up of the scheme. We have worked out roughly what the forgone


tax relief will be. As I said, we have excluded a number of activities that we do not think are appropriate. At this stage, a number of merchant banks and investment trusts are putting together potential venture capital trusts. The information that I have read contains no evidence that they are going into the sort of low-risk, property-backed investments that the hon. Gentleman mentioned.
I have noticed the investment mentioned by Rothschilds, which is interested in helping small firms in the food manufacturing and food processing business, which needs to access high technology and where a problem exists in raising capital. I hope that no one in the Committee will criticise firms benefiting from this sort of scheme.

Mr. Andrew Smith: The Financial Secretary has mentioned Rothschilds twice. In what form were Rothschilds' comments made to the Government? Did it make them as an adviser or as a consultant on the matter?

Sir George Young: Speaking from memory, Rothschilds put out a press release welcoming the scheme on Budget day and it was available for everyone to read.

Mr. Smith: Is that all?

Sir George Young: As far as I am concerned, that is all.
One of the amendments proposed by the hon. Member for Oxford, East would restrict the take-up to schemes that were taken up before, I think, April 1997. Because the Government are keen to ensure that good-quality investment arises from the venture capital trusts scheme, I do not think that that is a sensible way to proceed. Everyone agrees that it takes time to look this out and to encourage it. VCTs will often want to research the sort of investment that they wish to make before they get off the ground. Putting a time limit on the scheme, especially one as short as two years, will tend to hurry that process, which will not always have good results.
The second reason for objecting to the amendments is that they may have a perverse effect. More VCTs may seek approval in the first two years than would otherwise be the case, simply to meet the deadline. The purpose of the amendments may have been to save the Exchequer money, but they would not necessarily achieve that, and we could be left with a large number of potential VCTs lying dormant, without raising any new capital for the economy.
As with all enterprise investment scheme rules that the Government now believe it is reasonable to relax, the land rule was inherited from the business expansion scheme. It was introduced to prevent companies that held more than half their assets in land and buildings from using the scheme. The rule, however, became onerous to operate because it required regular valuation of assets. Even more worrying, it could prevent a trading company—for example, a manufacturing company—that owned its own premises from using the scheme. It surely is not right to preclude a company from using the VCT scheme merely because it owns its own premises. That would be a ludicrous proposition and that is why we are not supporting that exclusion.
The proposal is a serious response to a serious problem. Nothing I have heard so far in the debate has convinced me that the premise on which it is founded is otherwise than correct. Real potential exists in taking the concept forward. A real opportunity exists to open up lower-cost risk capital for small and promising new businesses. I very much hope that the Committee will reject the amendments and give the clause a Second Reading.

Mr. Malcolm Bruce: I wish to speak to amendment No. 11. I hope that, in spite of his opening remarks, the Minister will consider the amendment because it recycles the Government's own argument, and with legitimate force. He has not convinced me that circumstances have changed so dramatically that serious consideration of the amendment is not required. However, let me first put the debate and the amendment in context.
It is generally recognised that there needs to be a fundamental shift—perhaps even a cultural shift—in the way in which we finance small businesses and in the availability of finance to small businesses. To the extent that the Government's proposals for venture capital trusts are a contribution to that, I and my colleagues welcome them and, in principle, support them. The amendment is specifically a qualification; it in no way constitutes opposition to them. They could be useful and helpful although I stress that they are not the whole answer but a contribution towards the resolution, or at least a reduction, of the problem.
One problem is that of developing new incentives for business investment by means of tax breaks. Surely after 15 years in power, the Conservatives are able to recognise that tax breaks have their uses but, by definition, create the potential for abuses. One person's tax incentive is someone else's tax avoidance scheme. That is not a contentious statement; indeed, it is accepted as part of the business of tax avoidance. However, the right balance must be struck so that we do not create a system that is geared more to tax avoidance than to the creation of investment for small businesses.

Mr. Forman: I do not think that the hon. Gentleman was a member of the Standing Committee that debated last year's Finance Bill. Had he been a member, he would have had the opportunity to take part in an important debate on the difference between tax avoidance and tax evasion. Will he place on record the fact that tax avoidance is a legitimate activity, whereas tax evasion is not?

Mr. Bruce: I have no problem with that proposition, but the fact that something is legal does not mean that it is efficient; nor does it mean that it is in the Exchequer's interest or that it will create the benefits that the tax breaks were created to achieve.
So that there is no doubt, I repeat that basically we welcome the proposals on venture capital trusts. I hope that they will succeed in helping more money to get to the small businesses that need it. I see no conflict of interest, but I am concerned to ensure that we get the balance right.
Before I examine that particular part of the amendment, it is worth asking the House to make a simple comparison between small business finance and the success of small businesses in the United Kingdom and those in, for example, the Republic of Germany. There are some fundamental differences that will not carry over, but there


is a growing recognition—perhaps because of the difficulties in the property market that we have experienced in recent years—that it is a matter of culture that we tend to regard investment in property as a higher priority than investment in business. That is one difference between the cultural attitude of the average Briton and that of the average German.
Before he buys a house or invests in property, the average German will choose to invest in a family business in which he can have a stake, either directly, if it is his family's business, or indirectly, if it is someone else's business, through which he can contribute to the wealth-creating process, the economy and, of course, his own prosperity. We have to find a way to make that cultural shift in this country.
Perhaps the one silver lining that might yet emerge from the otherwise disappointing state of the property market is that circumstances are forcing us to reassess whether it is right for us as individuals—let alone business people—to put so much of our savings into property rather than business. To the extent that the climate is changing, I accept that the scheme may make a contribution.

Mr. Butterfill: It has been said from the Opposition Benches that property is a low-risk investment. Does the hon. Gentleman agree that that view would not be accepted by many of the people who now have negative equity on their homes? Experience over the past few years shows that property is a very high-risk investment. Nor would that view be accepted by the many property companies that have gone bust or have had to be rescued by all sorts of schemes. The state of the property market in the past few years has shown that there are just as many risks in property as there are in any other business. Under those circumstances, does the hon. Gentleman think that the scheme is likely to be abused?

Mr. Bruce: I accept the first half of the analysis. That is a fairly widespread, obvious observation of what has happened. I shall return to the hon. Gentleman's particular point when I address the detail of the amendment, because he made a fair comment, but first I shall finish the broader argument about schemes for encouraging investment in small businesses.
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Having looked a little more closely at other aspects of small business finance in the United Kingdom and in other countries, I saw that there was clearly a role for the banks in general. It is interesting that the Minister, quite without question, acknowledged that there is a venture capital gap. Most hon. Members who take part in debates on small businesses probably agree with that, but it is not always true that central bankers and joint stock bankers in this country agree. I have often heard the argument that there is absolutely no shortage of money, but there is a shortage of suitable enterprises. That, of course, is a matter of judgment and depends on what a banker decides is a good investment.
The banks have poured money into dubious ventures in South America, which they have had to write off, while denying many potential enterprises in this country the funding that they wanted. There is no doubt at all that too much business is also funded on short-term overdraft

rather than on longer-term loan and equity. The structure is not always satisfactory, which makes businesses vulnerable.
The Government could explore a partnership between themselves and the banks to try to find ways in which small businesses could have access to finance through the banking system comparable with that available to larger companies. In my own experience of running a small business—I am told that it has not changed all that much over the years—I went along to my bank with a proposition, a business plan and an indication of my cash flow and my requirements, and the bank more or less said that it did not want to see my business plan. I was told that, depending on my equity, if I owned my own house and if I was prepared to put it on the line, I would be given the money. That was not the help that I needed. It was not the right attitude. It meant that I had to take a considerable risk.
However, what really irked me was that even though the bank was getting its security, I was told that, of course, as an untried small business, I had to pay cash in advance when ordering basic working capital equipment to run the business, as I could not get credit. I paid a premium rate of interest on the money that I had to borrow from the bank because I did not have a proven track record—despite the fact that the bank had total security over my home. It seemed double jeopardy for me and double security for the bank. Time and again, small business people say to me that they have to pay more interest to finance their wage bills than their customers, who do not pay them and who make them wait for payment. They say that they are being squeezed at both ends.
You may call me to order, Mr. Morris, but the point is relevant. The scheme is helpful, but it does not deal with the problem that I outlined. I hope that the Minister will recognise that we need to look more widely at ways in which to change the culture. However, I accept that the scheme contributes to that change.
I shall refer to the specifics of amendment No. 11 and the restrictions in it, and also address the point made by the hon. Member for Bournemouth, West (Mr. Butterfill). It is true that the property market has been somewhat depressed, although it is variable. Indeed, in certain sectors of commercial properties, there are signs of an upturn. However, it is acknowledged—the Government clearly had to amend the business expansion scheme to take account of the fact—that property-based schemes, essentially, have been used as an abuse of the previous schemes. People were not investing in productive enterprise but were simply building up property portfolios—that is the cultural point that I am making.
The Government introduced the restriction, and I am sure that the Minister is aware that the wording of my amendment is taken entirely from their own legislation on business expansion schemes. I do not think that the Government have made their case; although in the short term the climate may not be encouraging, the property market problem could lead to abuse in the future, and that could turn a good scheme into something that to some extent falls into disrepute.
I respond to the hon. Member for Bournemouth, West by saying that all that is required for there to be a potential abuse is an upturn in one sector of the property market, taking it significantly ahead of inflation—I hope that he is optimistic enough to see that that may happen in some places.
Far be it from me to give tips to those who plan such things in the City, but I represent an area that has not suffered the collapse in property prices that has happened elsewhere—we have experienced quite the reverse—and I can see that someone could easily be interested in offering a property-based portfolio in Aberdeen and the rest of north-east Scotland, where over the past few years there have been rent revaluations adding 200 and 300 per cent., and increases in both domestic and industrial property prices well ahead of inflation. People may say that we have also had a downturn, but it did not happen at the same time as the national downturn.
Circumstances can change. I do not wish to disparage the idea that people can invest in property, or to suggest that property is not a legitimate business. However, simply investing in the capital appreciation of bricks and mortar does not fundamentally add to the national wealth. I repeat my earlier analysis that that is part of the problem of the British culture—[Interruption.] If I buy a piece of property and it appreciates, nothing has been done to create new material resources, whereas if I buy a business making or selling things or providing services, something definite has been done to create national assets. Furthermore, as we have experienced over the past few years, what goes up can come down with one hell of a crash, especially if it was based on paper revaluations.

Mr. Butterfill: Will the hon. Gentleman explain how, if his amendment were accepted, he would overcome the problem of a manufacturer with a substantial asset—perhaps his own factory—that would take him above the limit? By what methods would the hon. Gentleman cater for that?
Secondly, how would the hon. Gentleman deal with the problem of the variations in valuations that appear from time to time, both because different valuers are used and because of rapid changes in the property market? Surely we now know that that market is far more volatile than we used to think. At the time of the BES abuses, we all thought that property values would go up for ever, but I do not think that many of us believe that any more.

Mr. Bruce: That is a fair point, but although the Government are relaxing the provisions now, they administered the scheme on their own terms in the past. The argument about valuations is important and valid, but the question is administrative and can be resolved. There could be a periodic revaluation by the normal methods—either by using the district valuer or by having two competing valuations. That would be perfectly reasonable.
The more specific arguments about valuations and about a manufacturer with a substantial property investment raise two points. First, if such a person owns a substantial amount of property, he also has the means to raise the finance himself. One therefore wonders whether he needs the attraction of venture capital trust funding. He has an asset against which he can borrow.

Mr. Butterfill: rose—

Mr. Bruce: I have already given way to the hon. Gentleman a couple of times.
The second point is that I am somewhat sceptical about the idea that many companies are geared so that the value of the property is more than 50 per cent. of the value of their total business. In my opinion, unless it is a property-based business—in which case it should be

properly restricted—that business has got its gearing slightly wrong. However, that issue comes into play in some businesses, such as hotel businesses, and the potential restriction that the amendment proposes is relevant in those circumstances.
In effect, the Minister has said, "We did have that restriction but, perhaps because the property market is rather quiescent and because people have complained that it is slightly complicated, we have decided to relax it." However, the commentators—not only myself and not only the Liberal Democrats—say that the Government are making a fundamental miscalculation, which they may live to regret. That is my argument.
I think that the Government accept that the amendment is not a wrecking amendment, nor is it spiteful or irrelevant. It is pertinent, and its aim is to protect the virtue of the Government's scheme, to ensure that the scheme does not fall into disrepute because it becomes open to abuse of development simply as a tax shelter rather than what it is designed to be—a real contribution to opening up investment for small businesses.
Maurice Fitzpatrick, senior tax consultant of Chantey Vellacott, commented:
EIS share issues are potentially subject to the same kind of marketing abuse which existed for BES in the 1980s.
He said that investors would now be
bombarded with schemes, only a proportion of which made sense".
He said that effectively they would be
squandering their tax relief on manager or proprietor expenses".
The Government should be mindful of those worries.

Mr. Tim Smith: That was referring to the enterprise investment scheme, not venture capital trusts.

Mr. Bruce: I appreciate that, but the same problem will continue if the Government are so relaxed about it. We ask the Government not to spoil a good idea by being too relaxed about it and allowing it to become a marketing tool for tax shelters, rather than a genuine contribution to small business investment because, if that happens, the Government will need to modify it substantially later.
It is possible to spoil a good idea by being too lax about it. After all, the Government have said that they are anxious to maintain tight control of public expenditure and public finances.
If, as a result of miscalculation, the budget is exceeded because the take-up is greater than expected, because the opportunities are much greater, simply for tax shelter purposes, or if money is diverted away from genuinely productive investment, the danger is that people will say that the scheme is bad and did not deliver the goods, and we shall have to go back to the drawing board.
I repeat that I believe that the Government have the basis of a good scheme. We propose an amendment that will ensure that it continues to concentrate on the objectives that the Government have in mind, which we support and endorse.
I think that there is even uncertainty about the scheme on the Government Benches. The Government should take seriously the argument about tax loopholes. They have, understandably, poured scepticism on the argument of, for example, the shadow Chancellor of the Exchequer, that substantial amounts of money can be reclaimed by closing loopholes. They have retorted, also with some justification, that closing tax loopholes effectively places extra taxes on business.
However, the Government must recognise that, if they create a potential abuse that costs a significant amount, they give credence to the argument that there is more opportunity to close loopholes. In those circumstances, it is astonishing that, having recognised that they got it wrong with their previous schemes, the Government appear to be knocking that lesson aside casually and, as some commentators are saying, they are in danger of making a potentially costly mistake.
What alternatives exist? The Red Book calculates that the scheme will cost £150 million in 1995–96, which presumably is in lost tax revenue. That figure will be up to £290 million in 1996–97. Those are only estimates, because the figures are based on the presumed take-off. If our concerns are justified and the property market goes into some sort of unexpected pre-election or even post-election upturn—that seems unlikely at present—we are concerned that the figures could soar out of control.
The Government have a strategy to keep public finances under control. They want to cut taxes, but should they suddenly find that their figures are out by a factor of one or two, questions will inevitably be asked about how they managed to let rip the economy and how they lost control over it. The Government have not imposed cash limits or restrictions, other than the approvals that might provide some sort of control.
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The Government could find a substantial amount of money being used in that way. If that money was being used to achieve the cultural shift that I mentioned and for genuinely wealth-creating small business investment, I would say that it was well forfeited by the Exchequer. But if it was simply being used for schemes based on an upturn in the property market rather than for real wealth creation—schemes that were being promoted as tax shelters and havens—I would not regard that as good use of the money. The Government would be rightly criticised for failing to get a grip on public finance.
We are proposing a constructive and helpful amendment that is entirely in accord with the Government's realisation of what happened under their previous schemes. While I acknowledge that the Minister contends that the proposals are fundamentally different from previous ones, it is clear that they are not—not just to me, but to those who make a living in the City out of such packages. They believe that the Government may have made a mistake. The Government may find that the policy will be abused and the finances will go out of control. They may have to forfeit more tax revenue than they intended for less productive gain.
In those circumstances, I genuinely and sincerely commend the amendment to the House. It is constructive and designed not to undermine the positive and beneficial effect of the Government's proposals, but to ensure that they are targeted where they will be most beneficial—productive investment.

Mr. John Horam: The clause, and the amendments and schedule associated with it, involve the subject of the financing of small businesses, and all our speeches today will concentrate on that. We should remind ourselves of the importance in the economy of small businesses. There are about 5 million businesses in this country at present, 97 per cent. of which have fewer than 20 employees and 90 per cent. of which have fewer than 10 employees. None of us are in any doubt as to the

significance to the economy of small businesses, which are growing in importance, as the hon. Member for Gordon (Mr. Bruce) acknowledged.
The down-sizing of large businesses, the stripping out of layers of management in a relatively ruthless fashion and the out-sourcing of all sorts of competencies that have traditionally been done inside large companies provide opportunities for small businesses and starting up small businesses. I am delighted that my hon. Friends, not only in the Treasury, but at the Department of Trade and Industry, have come up with a large number of schemes.
I do not think that the Opposition have questioned the size of the Government's effort, although they may have criticised the direction. I understand that in the Budget alone, the schemes combined add up to about £1.7 billion over the next three years—a substantial sum. That takes into account, not only the VAT thresholds, but the transitional relief for business rates and the venture capital trust scheme.
I have one concern. The measures fail in one crucial sector: start-ups. A surprisingly small number of the schemes we are discussing help people to start businesses as opposed to helping them to expand them. The balance between providing help to start a business and providing help to expand a business is wrong. More help is needed at that crucial stage.
In my experience of talking to venture capitalists I have found that they are not concerned to consider schemes that require less than £2 million—

Mr. Forman: Half a million.

Mr. Horam: My hon. Friend says that the figure is £500,000. But even if the minimum level of interest is £500,000, the same is still true. Venture capitalists say that it is simply not worth their while to put all their effort into such schemes, when the figures involved are often £50,000, £100,000, £150,000 or maybe £200,000 at maximum.
In The Times I read of a dentist who had created a new portable dentist's drill to carry out dentistry at home—God forbid that we should have dentistry at home as well as in the dentist's chair. He was searching for finance and was quoted in The Times as saying:
The attitude in Britain was all wrong. It seemed as if we had to prove we were not defrauding anybody before we could start. Abroad we were welcomed with open arms.
That dentist has taken his business to Austria, where he is receiving £200,000 from the Austrian Government towards research and development prior to launching his new product. We have missed the opportunity—perhaps to our regret.
Although the measures are welcome—I fully concede that they are substantial—they do not tackle that problem. Many of the other schemes that are part of the Treasury's armoury—for example, the loan guarantee scheme—are also not helping. The hon. Member for Gordon mentioned banks and the role of banks within small companies. His comments about how banks approach the issue were correct. But the approach taken by the banks does not help start-ups, and banks are becoming less and less concerned with start-ups.
The welcome new schemes in the Budget do not provide a great deal of help for start-up businesses. In addition, the money that has previously been available for start-ups is not as great as it once was. I learnt with


consternation that one of the training and enterprise councils has recently had to cut out entirely all the money previously available for supporting enterprise. As a result of the new arrangements brought together in the single regeneration budget of my right hon. Friend the Secretary of State for the Environment, all the money is now being spent on training. As a result of the new framework, one TEC will have no money next year to support enterprise schemes.
We need patient money—money that is willing to wait for a return for perhaps four, five or six years. Obviously, it is hoped that the return will be all the greater. In its excellent little pamphlet "Agenda for Enterprise", the Federation of Small Businesses states:
in order to encourage enterprise we would welcome the provision of secure, stable, long-term finance, with preferential, fixed, low-interest loans for small businesses … A Government-funded `soft loan' scheme should replace the plethora of Government enterprise schemes (Enterprise Allowance Scheme, Loan Guarantee Scheme etc)".
That is what small businesses want.

Mr. Forman: It is precisely because my hon. Friend is right about patient money that it is foolish of the hon. Member for Oxford, East (Mr. Smith), who is not currently in his place, to suggest a fundamental review after two years. In many cases, much longer periods will be needed to form an intelligent assessment of the genuine risk capital prospects.

Mr. Horam: I agree. I do not think that we need any reviews. The balance of the schemes is broadly correct, but in the one sector that I have mentioned, more effort needs to be made. The effort required would not involve much money. I have written to my right hon. Friend the Chief Secretary and also to my noble Friend the Minister for Consumer Affairs and Small Firms at the Department of Trade and Industry with specific proposals on helping start-ups. The suggestions were made to me by a company called Alpha Europe Associates, which has considerable experience of the subject.
I suggested that a small fund with a mixture of Government and private sector money—perhaps not more than £100 million of Government money—topped up with £200 million of private sector money, managed by people with experience of starting up small businesses, would constitute the core of an effort to get quite a lot of small businesses off the ground. We are talking about only £10,000, £50,000 or £100,000; we could start a lot of small businesses with £100 million or £200 million.
I wrote to my right hon. Friend and, as usual, I received a well-written and sympathetic reply. However, he raised three objections to my proposals: first, they would cost money; secondly, they were bureaucratic; and, thirdly, they would distort competition—very traditional arguments from the Treasury.
First, my proposals need not cost a lot of money. We could do a great deal of good with a small amount of money. We could achieve good value for money by putting Government or private sector funds in a proper framework behind small business start ups. If we were slightly less generous with the venture capital trust proposals—which are costing £290 million—and allocated some of that money to a start-up scheme, I think

it would prove a wiser use of public funds. My proposal could cost the Treasury nothing but a redistribution of the effort that it has already made.
Secondly, I do not think that my proposals are in the least bureaucratic. The machinery for assisting small business is already in place. My right hon. Friend the President of the Board of Trade has developed the business link scheme throughout the country. That sort of machinery could be used to provide some small financial help together with the counselling and training already provided under the business link scheme. There would need to be only a small guiding core of people at the centre of Government helping the process along.
Thirdly, any scheme—the Government have a large number—can be construed as distorting competition. Surely one more scheme would not distort competition unduly. I do not take that argument very seriously.
Although I fully support the imaginative, large-scale and generous schemes which my hon. Friend has introduced in the Budget, I think that more attention must be paid to the problem of business start-ups. The competitive economic climate created by the Government in the last few years offers the opportunity to generate many more enterprises and reduce unemployment significantly.

Mrs. Helen Liddell: I am delighted to be called to speak after the hon. Member for Orpington (Mr. Horam) because I agree with a number of points in his speech. I wish to address my remarks to the area of business start-ups.
As the Financial Secretary said, it is important to look at the broader context of the purpose behind establishing venture capital trusts. The aim is to provide assistance to small and medium-sized enterprises but, regretfully, I believe that the Government have missed a valuable opportunity by going down this route.
There is a problem with the venture capital industry in this country. The hon. Member for Orpington referred to the reluctance to invest: it is difficult to raise money for projects of £2 million and less, particularly in the area of business start-ups. If the start-ups are high risk or high tech, the difficulties are even greater. The venture capital industry in this country is not adventurous; like our banks, it tends to be risk averse. If we are to promote the growth of small businesses we have to ensure easier access to finance.
I regret that the Government are concentrating on the tax-incentive side of releasing finance under venture capital trusts. I recognise, as does the hon. Gentleman, that we need to establish a fund to assist small businesses. However, I think that the Government must give a signal to the banking community that small business has an important and growing role in our economy. If people have to access finance for small business start-ups through a maze with a carnivorous plant at every corner we will not see the kind of growing, wealth-creating economy which allows everyone to benefit from the enterprise of a few.
The venture capital trusts as proposed by the Government are the son of the business expansion scheme. The Government have learned very little from the chaotic shambles that that scheme became when it was hijacked by those who used it to make a quick buck. We


must also consider the role of advisors. Advisors are often the ones to benefit most from Government schemes, not the businesses which receive money in the first instance.
Many people who start up in business are faced with a plethora of difficulties. The one-stop shop concept has not percolated through the economy to the extent that the Government anticipated and people are bemused by what they are expected to do in order to set up a business.
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As the hon. Member for Gordon (Mr. Bruce) pointed out, new business men and women confront difficulties every time they go to the bank. At the small or medium-sized enterprise level, property provides the collateral which enables people to raise money to start a business. At present, banks are willing to lend only if people are prepared to put everything on the line—not just their house, but preferably their granny also—as security for the loan.
The Government's venture capital trust proposals address only one side of the issue. I am particularly interested in the field of business angels. I see nothing in the Government's venture capital trust proposals that will create a meaningful environment within which they can thrive. I have seen good business angels and I have also seen very bad business angels—those who seize any opportunity to rip off people who are prepared to put their livelihoods and careers on the line in trying to establish a business.
We must harness all available savings into the investment process in order to expand the small to medium-sized enterprise sector of the economy. The business angel comes into his or her own when he or she has a commitment to the business that is being established. A concern that I had about the business expansion scheme—notwithstanding the fact that it was hijacked—that I also have about the Government's proposals for venture capital trusts, is that they build a remoteness into the relationship between the investor and the enterprise.
Businesses require long-term commitment. I agree with the hon. Member for Orpington's point that money is increasingly available to small and medium-sized enterprises in the short term, but at the first hint of trouble—for a start-up, it is usually about 18 months in—the money starts to dry up and people face a tremendous void which can lead to business failure and personal bankruptcy. The Government have not proposed anything to ease that situation.
I would like to see more imaginative thinking in providing finance to small and medium-sized enterprises—not least because, as a Scot, I recognise the difficulties within the Scottish economy. Throughout the 1980s, there was a disproportionately low number of business start-ups in Scotland. I have cited the figures in the Chamber before and I hope that hon. Members will not be bored if I repeat them. They are extremely dramatic. If Scotland had kept pace in job creation terms with the level of business start-up experienced in the south-east throughout the 1980s, we would have created 195,000 extra jobs. Even if we had imported the death rate of businesses throughout the recession, we would still have been ahead by 36,000 jobs.
There is a supplement in today's edition of The Scotsman which examines business start-ups. Every survey that has been undertaken by the newspaper and by

Scottish Enterprise has found that 70 per cent. of small businesses say that the biggest obstacle they have encountered relates to raising start-up finance and finding the funds that they require after about 18 months. Starting a business is an extremely risky venture. As the hon. Member for Orpington said, many people start up businesses because they have been made redundant from bigger enterprises. They are not used to a small business environment, and it takes them time to adjust. The proposals in the Bill represent a missed opportunity to help create the environment which would allow small and medium-sized enterprises to become established and grow.
I am concerned about the point made by my hon. Friend the Member for Oxford, East (Mr. Smith) about the property exclusions. There is always an attraction for money to go where the easy option is— towards property. That is what happened in various schemes in the past and it is extremely disappointing that the Government have not sought to recognise it and plug that loophole.
Referring to amendment No.15, it is important that we get some empirical evidence of how the schemes operate. Particularly throughout the 1980s, there were numerous schemes aimed at generating finance for small and medium-sized enterprises, but we in Britain have not yet got it right. We are still getting wrong the structures that we create. Too much emphasis has been placed on providing tax incentives for those with money. Perhaps some of those on vastly inflated salaries from newly-privatised utilities will consider putting some of their money into schemes that will help create small businesses. Quite frankly, We have missed the opportunity to do something meaningful for the small business community.
Two years is an inadequate time in which to assess the scheme. Here in the Chamber it may be an interesting debating point, but in two years a man or a woman seeking to set up in business can go from being prosperous and hopeful, with plenty of opportunities, to personal bankruptcy and the need to dig oneself out of a hole that one is in because of the inadequacies of the financial sector in Britain.
I was interested that the Financial Secretary referred to the role of Rothschild. Perhaps he has an inside track into the thoughts of Rothschild through Lord Wakeham who joined the firm yesterday.
He referred to the Association of Investment Trust Companies that initially welcomed the proposals from the venture capital trusts, but has since entered caveats into the operation of the trusts and wishes the Inland Revenue to take a closer look at how the trust companies can operate in the best interests of investors. I should like the Inland Revenue and the Treasury to examine them to make sure that they operate to the long-term benefit of the businesses that, hopefully, will be started.
I share the view of the hon. Member for Orpington; there is a need to take start-ups into account. I greatly regret the fact that the proposals in the Bill represent a massively missed opportunity and I have even more regret that, after more than a decade of looking at how we can fill the equity gap for small businesses, the Government have failed to grasp the nettle and address the problems that the businesses create and, in failing to do so, limit the potential for economic growth in Britain.

Mr. Forman: I shall try to be brief, because many of the most important points have already been made.
It is clear from the speeches of the hon. Members for Oxford, East (Mr. Smith), for Gordon (Mr. Bruce) and for Monklands, East (Mrs. Liddell) that there is a great deal of common ground on both sides of the Committee, at least on the principle that we want to attract more risk investment into business start-ups and small and medium-sized businesses generally which, in certain circumstances, could have a really dramatic future. One thinks of the drugs sector and some of the high-tech firms that have grown up on science parks and so on.
Even in Britain, with all the criticisms levelled against our systems and our culture, we achieve some significant breakthroughs and that is a good thing. We need more of that, and the answers to be provided to encourage it do not consist simply of tax relief measures, although they play an important role and the idea of venture capital trusts is very helpful.
Clearly the banks have a much more important role to play than hitherto. I agree with the hon. Member for Monklands, East that business angels—an idea very much promoted by the Government—also have an important role to play. We want a country in which they are many more high-net-worth individuals who are prepared to take risks because they are attracted by them, and not necessarily with the benefit of tax relief. That would be the best outcome.
I am rather saddened by the way in which the Labour party—and to some extent the Liberals, too—seem still to be obsessed with a form of voodoo economics whereby, when examining any form of tax relief, they immediately look not so much at the potential benefit of the relief and the result for the supply side of the economy or the jobs, as at who is likely to put their money into it or be induced to do so, and whether it is fair.
All money, so long as it is legally earned, is welcome as investment, whether for business start-ups, small businesses or anything else. Britain needs more investment and more risk taking. We should not be so preoccupied with where the money comes from.

Mr. Malcolm Bruce: The hon. Gentleman's re:mark was a little cheap. Is he suggesting that, when the Government amended the business enterprise scheme because of the abuse of property, they were also behaving in a somewhat disgraceful manner?

Mr. Forman: Not at all. I was trying to speak in a friendly and ecumenical spirit, as the hon. Gentleman will learn if he listens on.
The evidence that the Chancellor's idea for venture capital trusts goes back to 1993 demonstrates that the Government have been keen to learn such lessons as have been appropriate from the experience of the business expansion scheme.
It has been said that this is not a business expansion scheme; it is a different approach, but the very fact that it is a different approach suggests that Ministers and officials have learned that there were shortcomings in the BES—that are now widely acknowledged—and they are not repeated in this approach.

Mr. Betts: Is it not true that exactly the same comments were made by Ministers when the business expansion scheme was introduced? They said that there

were no problems, there would be no abuses and there was no need for proper monitoring. All the problems came to the fore many years later, and the Government had to take action, so it is not surprising that the Opposition should be suggesting that the scheme should be reviewed in two years to see whether abuses exist as they did with the business expansion scheme.

Mr. Forman: One of the main concerns that emerged from the business expansion scheme was the emphasis on investment in land and stationary property which did not generate development potential or much else in the way of extra activity.
The Opposition seem to have got their knives into property companies, but there are two issues that they have not considered. First, in answer to the hon. Member for Gordon, if someone were dealing only in the buying and selling of land, that would be excluded under the terms of the clause.
Secondly, Opposition Members frequently complain about the need for the Government to do something to boost the construction industry and all the professions related to it. We hear them talk about all the unemployed building workers, but whether a company is engaged in the building of new capital plant or the maintenance of buildings, it is creating jobs in the economy and it will have a real and virtuous effect on the economy, even if the venture capital trusts lead to new companies being created which essentially are involved in property development. I see nothing wrong with that; it creates jobs and economic activity that is recycled into the economy.
The Opposition seem to fail to recognise that riskier ventures—which are, by definition, the ventures that the Government are seeking to promote in the clause—can and do generate higher rewards for some investors prepared to take risks. The higher risk necessarily engenders the higher reward on those occasions when it works out. It seems perfectly proper to spend some £290 million of taxpayers' money on that very good cause.
I am not over-enamoured of tax relief as a general principle. If we were not starting from here, I would prefer a tax system that embodied the minimum tax expenditures and reliefs, lowest possible rates and broadest possible base—but that argument is for another day. As long as we deal in the currency of tax reliefs as a way of encouraging certain forms of activity that are not sufficiently buoyant at present, the scheme represents an effective, targeted and adequately circumscribed approach.
I am surprised that Opposition Members complain that the scheme is full of potential loopholes. It occupies four and a half pages of what is already a long Bill. If hon. Members take the trouble to read them closely, they will find all sorts of caveats and belts and braces, to ensure from the Revenue's point of view that the scheme does not lead to unintended abuse. If it does, we can all be sure that the Revenue will act promptly to close any loopholes in next year's Finance Bill.
I say, not in anger but in sorrow, that, despite all the pretensions of the Opposition parties to be new Liberals, new Labour, new this and new that, a lot of the old thinking was evident in the speeches of Opposition Members. I wish that they would modernise as fast as the small companies being backed by the clause are modernising themselves.

Mr. Stevenson: This is another Government scheme that has tax perks at its base, and no Conservative Member has challenged that fact. There may be differences at the margin, and from previous, more fundamental schemes, but the proposal is dependent on tax relief for any chance of success. We have been that way before under this Government. However much Conservative Members protest the valid points made from this side of the House, they seem reluctant to address the fundamental issue.
I understand that the tax relief will be backdated to April 1994, presumably because the Chancellor announced the scheme in 1993. The proposal is based on several fragile assumptions. One is that presumably dynamic and go-getting venture capital trusts will be unable to survive unless they enjoy tax relief. That is a dubious proposition. If I were involved in such a trust, I would not be filled with confidence if the Government based their proposals on that assumption.
It is also assumed that the proposed legislation is watertight enough to give the Government some confidence that their proposals will eliminate abuse. Both assumptions raise important questions.
We would not be having this debate were it not for the fact that the financial sector has let down small and medium-sized businesses—if banks and financial institutions had not been racked with such chronic short-termism that they failed that sector. That factor has not been acknowledged in any speeches by Conservative Members.

Mr. Tim Smith: Ludicrous.

Mr. Stevenson: If the hon. Gentleman wishes to challenge my remark, I am willing to give way.

Mr. Smith: I thought that the one point on which there was a consensus in the Committee is that the equity gap in the UK was first recognised by the Bolton committee more than 30 years ago, and that we are trying to find a solution.

Mr. Stevenson: I am not sure that I am grateful for that intervention. I was making precisely the point that one must question the elements that created that equity gap. I argue strongly that the financial sector has played an important role in creating the investment gap from which small and medium-sized businesses in particular are suffering. Therefore, the Government's faith in the financial sector is touching.
Conservative Members said that the cost of the proposal will be £290 million. I accept that my arithmetic may be wrong, but from the Government's own publications it appears that the cost to the Exchequer over a three-year period is likely to be £680 million—and that figure should be on the record. It is dependent on venture capital trusts achieving their objectives over three years. They may or may not do so, and that will have a considerable effect on the cost to the Treasury. The figure will be high at the start, and may prove incorrect. The estimate is probably on the low side, because it ignores tax perks on capital gains and dividends.
Despite propaganda about the way that the financial sector has created investment, the scheme has the hallmarks of another expensive and . unfounded experiment. My hon. Friends referred to reports that cast

serious doubt on the value of tax breaks, including that produced by Warwick university and quoted by my hon. Friend the Member for Oxford, East (Mr. Smith). Such reports cannot be dismissed as irrelevant. They were produced after careful research and consideration, and reached the conclusion that tax relief-based schemes do not deliver the goods.

Mr. Tim Smith: Is the hon. Gentleman saying that financial institutions have failed to fill the equity gap, and that he does not like tax relief as a way of dealing with the problem? How does he think the problem should be tackled, if not through the tax system?

Mr. Stevenson: I cannot remember saying that tax relief cannot be used in a positive way. Perhaps the hon. Gentleman was not listening carefully. I repeat that there is no real evidence to suggest that tax relief-based schemes have worked or will work. It does not matter how much Conservative Members try to manoeuvre or manipulate the argument, because there is evidence to justify our concerns.
When I intervened on the Financial Secretary earlier, I compared venture capital trusts with the business enterprise and enterprise investment schemes. He rightly said that one problem with the BES was that it was not spread widely enough, and that the Government are trying to avoid concentration in the new scheme. That may be true, but schemes based on tax relief do not deliver the goods.
The hon. Member for Orpington (Mr. Horam) presented a different scenario, but I am sure that he is aware, as we are, that his proposals would be anathema to the Government.
Expensive schemes are being put forward with no empirical evidence to justify them. The Government, with their head down, are sailing as if in the Mary Celeste. At the end of the day, they will be discovered with nothing on board. That is why we are concerned.
The Department of Trade and Industry part-sponsored a report entitled "Understanding the Small Business Sector". When considering the business expansion scheme, which I am prepared to argue is ill-fated, it stated that the objective of the scheme is that small and medium-size enterprises should focus on tax breaks as "tax avoidance vehicles". The terms "tax avoidance" or "tax abuse" can be used in whatever way we wish, but a report that was partly sponsored by the Government creates great doubt about schemes that are based on tax relief. Will the Government ever learn?
I turn to the amendments. It is—

Mr. Forman: I am glad that the hon. Gentleman is about to speak to the amendments. Before he does so, will he tell us what approach he would favour? He has not done so yet, although he has told us what he does not favour.

Mr. Stevenson: There is a strong case for the Government to use whatever resources they may have available, but not in the way they propose, which is indirect and possibly extremely expensive. We should be looking to the Government to take direct measures to stimulate investment in an important sector of the economy. There is the distinction between the


Government's approach and the one that I would take. I would agree with some of the elements of the approach that would be adopted by the hon. Member for Orpington.

Mr. Butterfill: Will the hon. Gentleman give way?

Mr. Stevenson: No. I think that I have given way enough. I would like to bring my remarks to an end.
We, the Opposition, are saying that there are sufficient doubts about the assumptions that the Government have made to justify support for the amendment. Unless the Financial Secretary can give reasonable assurances that the Government's proposals will not result in tax abuse—I think that everyone recognises that there is potential for that—and that the scheme has a reasonable chance of delivering investment in small and medium-sized businesses that has been so lacking and that we all want to see, it seems sensible to say that, in two years' time, we should be looking again at how the scheme has developed and whether there need to be any changes to make it effective.

Mr. Butterfill: I should preface my remarks by reminding the Committee that the Register of Members' Interests shows that I am an adviser to the British Venture Capital Association. I remind the Committee also that the association has warmly welcomed the proposals for venture capital trusts that we are discussing.
I know that the BVCA would be unhappy if VCTs were used in the way suggested by Opposition Members to create tax shelters or property-based schemes. That would not be attractive to its members to whom I have spoken. The BVCA would certainly not be happy if that were the outcome of our deliberations. At the same time, the BVCA recognises that there is an urgent need, as the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) said, to encourage more investment in venture capital and to make finance available to smaller companies. It believes that a scheme of the nature proposed by the Government is a worthwhile way of achieving that.
There is a difficulty that became apparent during the course of the research undertaken by the Select Committee on Trade and Industry, of which I am a member. The hon. Member for Gordon (Mr. Bruce), who unfortunately is no longer in his place, was a member at the time.
It became clear that there was a funding gap. Many of the large institutions did not feel able to invest directly in very small companies because the costs were, as they saw it, disproportionate. That is why the venture capital industry is one of the fastest growing industries in the United Kingdom, to try to bridge the gap.
In response to the hon. Member for Monklands, East (Mrs. Liddell), I do not think that it is risk-adverse. It makes mistakes, some of which have been well publicised, but on balance it achieves success. The industry has made a worthwhile contribution to the British economy in recent years.
Some venture capital companies are prepared to make low-level investments. For example, 3i will make investments down to £50,000 in individual companies. Many other companies will go down to £250,000, and sometimes to a lower level if they think that a company

has an interesting future. Nevertheless, there is a shortage of available funds. Many other financial institutions are reluctant to help provide funds.
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The hon. Member for Stoke-on-Trent, South criticised the banks. It should be recognised that, essentially, the banks borrow money short-term. They take our deposits, and they may have to repay them at short notice. For example, the hon. Gentleman may go to his bank tomorrow and take out everything he has in it, and so may other depositors. The banks are required by law to maintain liquidity levels that make it difficult for them to make long-term investments, and especially risky ones. Their role in life is to take in money in the relatively short term and lend it out in the relatively short term. That lending role is their prime function.
Major investment must surely be made by insurance companies, which have long-term commitments arid long-term money coming in, and by the pension funds. There are difficulties for both in investing in risky ventures. They obviously have a fiduciary duty, especially in the case of pension funds, to their beneficiaries. They can invest only a limited amount of their portfolio, therefore, in high-risk investments.
There is a problem with the funding that is available for venture capital in the United Kingdom. The BVCA tells me that only a small proportion of the total sum that it has been investing in the past year or so has been provided by UK investors. A much greater proportion of its money has come, curiously enough, from overseas investors, especially American pension funds. In the United States, a recent provision encourages pension funds directly to invest in venture capital, in a way that does not happen here.
We may be taking a slightly different route. In the new legislation that we are proposing to introduce for pensions, we are rightly focusing on the need to maintain minimum solvency ratios to protect pensioners. The changes that we are making will make it even more difficult for pension funds to invest in the provision of equity—even equity for major companies—and still more difficult, because of the valuation and yield rules that we shall be introducing, to invest in venture capital. They may have to accept that no money will come in through dividends for the first couple of years, three years or even four years. They may even have to wait much longer than that.
There is fear in the venture capital industry about the very provisions that I support, as chairman of the all-party group on occupational pensions. I am passionately committed to the idea of adequate solvency for pension funds, but that in itself may in future make the provision of money for venture capital much more problematical. It is important, therefore, that we try to stimulate other forms of raising money. The provision of tax incentives is an important way to encourage that.
First, we must encourage the provision of money. Secondly, we must encourage our brightest and ablest managers, who may at present be in major companies, arid perhaps in receipt of high salaries with a comfortable arid secure existence, perhaps even with comfortable share option schemes, to abandon all that and start new enterprises, using their skills to create new wealth for the economy. To tempt those people out, to tempt the capital


out, we must provide an incentive. I believe that the incentives that we are providing through the trusts are important in that process.
Opposition Members criticised the fact that we propose rollover relief from capital gains for money invested in that type of activity. I would remind them, as I said earlier, that there is no need at the moment for people to pay CGT unless they particularly want to realise the investment in which their money is located. That location may be secure and unexciting, but as long as they keep it there indefinitely, they will not crystallise their CGT liability.
In my view, it is the minimum requirement if one says to them, "You will not crystallise your capital gain if you put your investment into a venture capital trust," because those people would be penalised if they moved their money from an existing investment into a VCT. Surely that is not what we want to encourage. I would go further and give them exemption from their existing CGT—if that were possible—because then we really would encourage people to move their money into something more dynamic and exciting.
Similarly, I believe that the other tax breaks that are incorporated into the proposals are important in motivating people to undertake what are really quite risky activities. The structure of the trust, too, is important, because in contrast to enterprise investment schemes, where one is investing in a single-company operation, we are encouraging a broader spread of risk. Although all the components of a VCT may be high-risk activities, by spreading the risk over a number of different activities, we minimise to some extent the problems that can arise from total failure of a single company. I applaud that.
The Labour party suggests that there should be a statutory requirement to review this in two years. Other hon. Members have pointed out that that is a short time horizon in which to assess the success of a new enterprise. As hon. Members who are involved in the venture capital industry will know, most companies are really only just getting off the ground at that stage.
In contrast to what the hon. Member for Monklands, East said, it certainly is not true that companies invest for the long term. 3i, for example, still has almost all the original investments that it made. It is not in there for a quick buck, and that applies to most of the other members of the British Venture Capital Association.

Mrs. Liddell: I can appreciate that the hon. Gentleman referred to 3i, but in doing so he emphasises one of the points that I sought to make: large venture capital organisations such as 3i will not go for the small to medium-sized enterprise that needs a small sum of money. The small to medium-sized enterprise is much more vulnerable to short-termism than the larger enterprise.

Mr. Butterfill: I am sorry that the hon. Lady was not in her place when I referred to her speech. She is quite wrong. 3i invests down to a level of £50,000 in individual companies, so it is the worst example that she could give. It goes down to a low level: it is precisely for that reason that I mentioned it. I am sorry that she did not hear my earlier remarks.

Mrs. Liddell: I referred to 3i with some feeling, because, in my previous occupation, which was interrupted by the parliamentary by-election .that brought me to this place, one of my jobs was to try to get money

from venture capital companies such as 3i, for start-ups that would have a turnover, within one to one and a half years, of £1 million to £1.5 million. Believe me, if I could have got money out of 3i, I would have been a much happier lady than I was when I entered the House.

Mr. Butterfill: I accept that the hon. Lady may find that not every proposal put before 3i or any of the other venture capital organisations is likely to find favour. It is always difficult. One must convince whomever one wants to invest in one's company that it will be a good investment, so I accept that many propositions are turned down.
But an awful lot are accepted, and if the hon. Lady reads 3i's annual report, or those of CinVen, Electra, Candover—or any of the other venture capital organisations—she will see the huge volume of companies that have been assisted. The point that I am making is that what we propose tonight will make that process much easier.
Let us return to the amendment. I do not think that a review in two years is an appropriate time horizon. Nor do I think that it is necessary, for reasons that I shall come to in a moment. I do not think that the proposals suggested by the hon. Member for Gordon are appropriate either, because there is no doubt—I have been advised quite specifically by venture capital organisations—that genuine business activities fell foul of the 50 per cent. rule and were precluded from obtaining funding on that basis. It is certainly no business of any of us tonight to wish to preclude genuine businesses from that support, simply on the basis of an arbitrary rule.
I accept that there is a genuine fear that VCTs might conceivably be used for some form of abuse of the tax system. They might conceivably be used for the same sort of abuse that we saw with the BES. I would be the last to wish that to happen, and the whole of the venture capital industry would be against it.
We have to look at a different climate today. In the 1980s, when BES schemes were popular, property prices, it seemed, were rising for ever, by huge margins every year. Property was the fashionable thing to be in. It was secure. One could not lose one's money. In fact, the longer one held it, the more it would be worth.
I do not think that anybody would pretend that we have the same scenario today. Property values have fallen substantially, whether it is residential property or major commercial property investments. Indeed, the developers of Canary Wharf, people in the City of London and throughout the nation lost huge amounts of money. I do not think that the risk of repeating the BES is very likely, given the present climate for property.
It is conceivable that, if we had a major revival of the property industry, some people might forget the chastening experience that they have had over the past three or four years and seek to go back into it again, but a provision in schedule 14 (12) of the Bill can deal with that. It provides that the Government can make regulations if it seems that they may be necessary as things arise in the future. I ask the Minister to give an undertaking that, if in future it appears that there is some abuse of the kind feared by Opposition Members, he will not hesitate to use those powers to put it right.
I go further. Between now and Report, when we shall have an opportunity to consider the clause again, although we shall have an opportunity to consider the principle of


it when we consider clause 60 of the Bill upstairs in Committee—I hope that I will be able to participate—if it becomes clear to the Treasury that all sorts of schemes are gathering place which are primarily asset-based schemes designed for tax avoidance, I hope that my hon. Friend will say that he will look again to see whether something more severe might be required. However, if it becomes necessary, I urge him not to consider the 50 per cent. rule, which caused so many problems in the past.

Mr. Ian Pearson: I begin by making some wider comments on finance for small businesses and drawing the attention of the Financial Secretary to the second report of the Bank of England on finance for small firms, which was issued recently. I do not know whether he has had an opportunity to read it. The Bank of England always talks in very coded terms about anything that it produces that might be mildly critical. Nevertheless, it has some interesting comments to make on finance for small firms.
In particular, it talks about relationships between small businesses and the banking community—the high street banks. It says:
There is still considerable room to improve further both relationships and the level of service provided.
That is the strong feeling that I receive from businesses in Dudley, West. They still feel that high street banks offer little alternative. They still find that the banks are extremely risk averse and are not considering cash flow, despite instructions in many cases from head office to do so when deciding on bankable propositions. The banks still very much consider security.
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One reason for that is the performance management targets set by some of the banking industries. I do not know what might be done about that. Setting performance targets to reduce the number of company failures, and so on, creates significant problems. It also creates problems at Government level, particularly when attempts are made to encourage small businesses to be more open and share financial information with banks.
If banks know that a business is in trouble, they will immediately want to pull the plug on it, because they understand that the Inland Revenue and Customs and Excise, as preferential creditors, are competing with each other to put banks into receivership because of their own performance targets.

Mr. Forman: In order to bring the hon. Gentleman's point up to date and to give a full picture, does he also agree that, in a recent speech, Pen Kent, the executive director of the Bank of England, to the parliamentary group for engineering development at the House of Commons, of which the hon. Gentleman probably has a copy, said that there is a continued shift away from overdrafts towards term loans in terms of banking support for small and medium sized businesses?
He went on:
When we first got involved in this subject, overdrafts were typically around 60 per cent. of all bank lending to small and medium sized enterprises. Now over 60 per cent. is .in the form of term loans.

Is not that a message of some reassurance to the hon. Gentleman?

Mr. Pearson: Yes, it certainly is a message of reassurance. I welcome the growing awareness of the small business community of some of the deficiencies of bank overdrafts and some of the benefits of other financial mechanisms that are open to them—not just term loans, but debt factoring and invoice discounting.
One reason for the great movement away from overdrafts is that many small businesses have seen them as a bad bet, and invoice discounting and debt factoring have provided far more attractive deals. The progress of term loans is welcome, but they are still very much granted on the basis of security rather than the cash flow position of a business.
It is also interesting that the report on finance for small firms comments on business angels and the dangers of the fragmented approach to business angels that currently exist throughout the country. That fragmented approach is equally apparent across a range of financial mechanisms that are available to small firms in Britain. We simply do not have an adequate and coherent package of small business support measures.
As an economist and a previous employee of an economic development and venture capital company, I believe that the case for venture capital trusts rests principally on market failure. Companies that wish to grow are unable to gain access to appropriate forms of finance at acceptable rates. That is a clear example of market failure.
However, venture capital trusts do not address the principal problem of small businesses that wish to grow and require finance—the need for long-term patient capital. I fully endorse the comments made by the hon. Member for Orpington (Mr. Horam) on that.
The venture capital trust legislation is complicated. I am slightly disappointed to see that it defines what is not allowed, leaving a number of grey areas, rather than positively defining what is allowed. As a result, the Opposition are concerned that it gives a licence to fertile City imaginations to devise tax avoidance schemes for the very rich which will do nothing to support growing businesses. I hope that that is not the case, and that the Chancellor will use what power he has to ensure that that is not the case.
The 70 per cent. rule on qualifying holdings in a company does not strike an adequate balance. I would be interested to hear from the Financial Secretary what restrictions, if any, are placed on the remaining 30 per cent. of the funds available to venture capital trusts. As I understand it, there is nothing in the legislation to prevent that money being invested in Pacific rim countries and other stock markets. I do not see why tax incentives should be provided to British taxpayers to allow a proportion of a venture capital trust's funds to be invested in the stock markets of other countries.
The three-year rule in reaching the 70 per cent. criterion creates the danger that money can be invested either in blue chip British companies or in ventures all over the world for a minimum of two years and that then there will be a final rush to meet the three-year criterion for investing in small unquoted businesses. I should like some assurance that that will not be allowed to happen.
The level of 70 per cent. for investing in small and medium sized companies is wrong. Venture capital trusts are likely to be set up with sufficient critical mass in terms of funding, so a level of 80 per cent. overall would be more appropriate.
I appreciate the need for flexibility when buying and selling companies, but with venture capital trusts of £50 million or £100 million that restriction does not apply. The tax incentives that are available mean that, although the shares in the venture capital trust will be tradeable, I would not expect that tradeability to be so significant as to mean that an 80 per cent. criterion would be acceptable.
With regard to the 50 per cent. limit on eligible shares, I appreciate the comments of my hon. Friend the Member for Oxford, East (Mr. Smith) that that might influence deal structures and be insufficiently flexible. However, I assume that most venture capital trusts will probably invest pari passu with other institutions, which will provide other forms of finance, whether it be mezzanine finance, term loans or a range of other financial packages.
That brings me to a point that I want to discuss later in terms of eligibility. Schedule 14 sets out requirements with regard to a company's business and what is a qualifying trade. We have had a useful debate on property. There is a consensus on both sides of the House that no one wants to see VCTs used as primarily asset-backed property schemes.
I fully accept the arguments, and I know of a number of companies requiring development capital whose major assets would be their land and buildings. Therefore, I understand the reasoning behind what the Government are seeking to do. Nevertheless, I see no reason why what is regarded as an investee company should not be defined by its principal business activity, and primarily property-based companies excluded.
I welcome the provision for royalties and licence fees for research and development: I know of a number of organisations that hope to amass funds to invest in new technological inventions and early pre-market trading. I hope, however, that venture capital trusts will also be able to take equity stakes in some of those companies when they reach the trading stage.
The Bill imposes a maximum for qualifying investments in a relevant company. My experience in the venture capital industry suggests that a limit of £1 million in any one company in any one year is too high. There is currently strong competition among venture capitalists for any reasonable proposition requiring development capital of £500,000 or more, as the hon. Member for Beaconsfield (Mr. Smith) pointed out. Given that strong competition and the fact that the money is clearly available—there has been no instance of market failure—I see no compelling reason why tax incentives should be made available for investments above £500,000.
In view of the present structure of VCTs, I anticipate a desire to invest in million-pound projects, which may be part of wider deals. That is not the real purpose of VCTs, which I support: the provision of development finance for those who cannot secure it by any normal means.
I also feel that the gross asset level of £10 million is far too high. The chief executive of the 3i group suggested that it might be worth considering £2 million, and in view of that, £5 million or so strikes me as .much more appropriate. I suspect that the scheme will gravitate

towards the financing of more robust businesses that could be funded conventionally—that VCTs will piggy-back on top of larger deals.
There is also a strong indication that VCTs will be used to fund management buy-outs and buy-ins. I have no objection in principle to companies' changing their ownership and management structures in that way, but I feel that such a churning of assets is not the primary purpose of the Bill, which is intended to support businesses that will grow, employ more people and deal with some of the country's unemployment problems.

Mr. Butterfill: Does the hon. Gentleman really think that VCTs will be used extensively to fund management buy-outs? It is fairly simple to finance them in existing circumstances. Complex rules will govern the use of VCTs; will not many of those planning management buy-outs decide that, given the complications, their use is not worth the hassle?

Mr. Pearson: Not at all. I believe that those who will run VCTs are exactly the people who are likely to provide institutional finance for management buy-outs. I think that they will say, "We will provide you with a £6 million package for your management buy-out, because the company can meet the £10 million criterion. VCT money will provide £1 million, and ordinary institutional venture capital will provide £5 million." I ask the Financial Secretary to impose an embargo on VCT funding of management buy-outs.
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I understand that the financial intermediaries and claims office of the Inland Revenue will be responsible for supervising it; the task would be greatly assisted, and financial probity assured, if regulations were introduced providing for an annual independent valuation of each VCT's unquoted portfolio.
The purpose of VCTs is laudable, but some of the detail is fundamentally flawed. As a result, the money that hon. Members on both sides of the House agree is necessary to support businesses is unlikely to be forthcoming. I expect the risk-reward ratio to prove unfavourably balanced in favour of reward in the long term. I think that VCTs will be used to fund management buy-outs at too high a level, providing deals involving £1 million VCT money as part of a syndicated deal with loan-funding institutions.
VCTs are only part of a piecemeal response to small business finance. A more coherent approach is required, and I welcome the comments in the Bank of England's second report about the need for a White Paper on the subject.

Mr. Tim Smith: The hon. Member for Dudley, West (Mr. Pearson) has considerable experience of the market, and he is entitled to ask whether the proposed tax relief is directed specifically towards what we all consider to be the area of market failure. That, I think, is the starting point for the debate: the area of market failure is the equity gap.
Although the equity gap has been identified by countless reports over the years, we have not yet found a satisfactory solution to it. Whether it makes sense to address it by means of the tax system is an interesting question. Like my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), I am not always


enthusiastic about creating new tax breaks: on the whole I prefer a broad tax base and low tax rates. First, one man's tax break is another man's tax bill; secondly, there is no doubt that tax breaks affect economic behaviour, and may distort it. They may not achieve what Parliament hopes to achieve.
The fact is, however, that we have been living with the equity gap for many years. I consider that we are justified in introducing this new relief, as long as it is focused as the Committee wishes it to be. It should be focused on smaller investments. There is, I think, a consensus in the Committee that venture capitalists are normally able to provide amounts of £500,000 or more, and that therefore the level should generally he below that.
Why does it matter? It matters because, as some growing small businesses are unable to obtain the equity finance that they deserve, they must go to the bank--but the cost of bank finance makes it unsuitable for a rapidly growing business, and in certain circumstances may cripple it. It makes much more sense for at least the fixed as opposed to the working capital of a business to be financed by equity, although long-term bank debt is certainly a possibility. That is what the new relief is all about.
Obviously, one has to try to find a satisfactory balance that will provide a sufficiently attractive tax incentive to bring in investment that would not otherwise accrue. At the same time we must try to ensure that the scheme is not so attractive that all sorts of tax avoidance experts abuse it. In practice, it is difficult to strike such a balance.
I agree with my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) that in such circumstances it makes sense for the Government to provide in the schedule a provision to allow the Treasury to change by regulation the definition of a qualifying investment. That means that if there is evidence of the kind of abuse that some Opposition Members obviously fear, it can be dealt with quite quickly. The Revenue is quite capable of dealing speedily with such abuses. It can issue a press release which states that the law will change from the date of that release and, under the schedule, it can table regulations quite soon thereafter to put the matter beyond doubt.
That is important because we must avoid the marketing of venture capital trusts principally for tax reasons. Far too many people went into business expansion schemes for the wrong reasons and many of them got their fingers burned. They may have received tax relief, but that is not much use to people who lose all their money. Many of the schemes were not viable and lost a great deal of money. That is unsatisfactory for taxpayers and the Treasury, and it is certainly unsatisfactory for the economy because we are debating means to grow businesses. We are not debating any old small business but growth businesses. We are trying to identify businesses with real growth potential which can be encouraged by venture capital to grow and create jobs quite quickly.
Venture capitalists say that there are three requirements for a satisfactory investment. First, one obviously needs money. Secondly, satisfactory management is required and, thirdly, there must be a sensible business proposition. In practice, it is often difficult to find . satisfactory management. Some business propositions are clearly

much more attractive than others and, in practice, shortage of capital is not normally a problem. At the moment capital comes from the United States rather than from the United Kingdom because UK institutions feel that they have enough invested in venture capital.
Generally, there is no shortage of capital, but particularly there is a shortage of amounts of £500,000 and below, and that is the area on which the new scheme needs to be focused. It should be made clear that that is the scheme's object.

Mr. David Shaw: My hon. Friend says that there is no shortage of venture capital, but surely there is a shortage of venture capital provided by private individuals. There has been far too much investment by institutions in high-risk areas and the individual who may also bring management skills to a company has not been given the opportunity to invest. Does my hon. Friend agree that we need an increase in the proportion of such venture capital rather than to have just institutional investment?

Mr. Smith: I entirely agree. People talk about capital gains tax, which has a very narrow base. My hon. Friend will know that many institutions pay no capital gains tax. It was quite possible to have a venture-capital backed company in which the only investor paying capital gains tax was the person who worked in it and managed it. Because all the other investors were tax exempt institutions they did not pay capital gains tax. That is indefensible, and it shows how unsatisfactory is the present capital gains tax regime. I agree with my hon. Friend that for people who take a considerable risk it is right that after a period of five years, during which they will have their money locked up, they should be able to take advantage of capital gains tax relief. That is an important aspect of the issue.
Another aspect which has perhaps not been sufficiently emphasised has been compared with the business expansion scheme. It is that under the business expansion scheme tax relief on the up-front investment was 40 per cent. The maximum relief in this instance will be 20 per cent. and that significant difference means that only half of the investment will be tax-deductible. That considerably changes the balance about which I spoke.

Mr. David Shaw: It has gone too far.

Mr. Smith: My hon. Friend thinks that it may have gone too far, but it changes the balance of advantage between the two aspects which I described. We need an attractive arrangement to bring in investors. My hon. Friend may feel that offering only 20 per cent. may make it difficult to persuade individuals to come in. However, offering 40 per cent. under the BES created the difficulty that people were able to say to prospective investors, "Look, you can simply eliminate your entire tax liability in relation to the amount which you invest in this company."
Relief of 20 per cent. is the right level at which to start and if it is found that it is insufficient to attract people we could have a look at increasing it. The fundamental difference between the two schemes will change the balance considerably.
The Liberal Democrat amendment seeks to eliminate property development. If I have understood it correctly—and the legislation is complex—property investment and


property dealing are already excluded. Therefore, it is property development that the amendment seeks to exclude. The hon. Member for Gordon (Mr. Bruce) suggested that property development did not create any new economic wealth. It seems to me that if somebody builds a factory or a warehouse he adds to the total of the nation's assets. There is often considerable risk involved in that. The property may be pre-let but it will often be speculative. A large warehouse may be built and only afterwards will an effort be made to let it.

Mr. Malcolm Bruce: Perhaps I could clarify the matter. I did not say that property development per se was incapable of creating wealth but that the simple appreciation of property value was a paper transaction that did not create wealth. The Government introduced restrictions last time because it was non-productive.

Mr. Smith: My hon. Friend the Member for Bournemouth, West dealt satisfactorily with that point. Over the past few years the property market has been transformed, to the point where the idea that one can make a fast buck out of property has gone. I cannot believe that the hon. Gentleman is seriously advising his friends to invest in property. Perhaps he knows something that we do not, but I cannot see that.
The Government have inflation so effectively under control that we are in a new environment, but it is difficult to persuade people of that. For over 30 years we have had a culture of inflation and people are finding it difficult to become accustomed to the new environment. I am not sure whether the hon. Member for Gordon made that point earlier. People will not make money simply out of the appreciation of property or any other asset over the next few years. That is not a threat. However, if the hon. Gentleman turns out to be right there is provision in the Bill to deal with that at the moment at which the Treasury feels that action is appropriate.
The difficulty with the hon. Gentleman's proposition, which I think he said he had taken from the business expansion scheme, is that it precludes some genuine business propositions and commercial arrangements from being eligible under the scheme. It is again a question of balance but we should not accept the Liberal Democrat amendment and allow such schemes to be advanced.
The hon. Member for Oxford, East (Mr. Smith) tried to encourage us to impose a time limit of two years. That is not necessary because it is open to us to reconsider the matter. We consider these matters when we are debating the Finance Bill each year. It will be some time before a venture capital trust is launched. There will have to be a stock market flotation to raise the capital and it will be some time before the cash can be invested because nobody will rush into that: the money will be invested only when satisfactory investments come along.
The period of two years in the amendment is totally unrealistic because the average time will be considerably less than that. Imposing a two-year limit would be premature. We need more time to review matters as they develop. If there is abuse in the meantime the provisions in the Bill will deal with it.

Mr. Betts: A consensus exists among hon. Members on both sides of the Committee that the short-termism of the financial markets and the so-called equity gap are a

problem. There has not been much dissent from the fact that that issue must be dealt with, as we need to get more investment into our industry.
I was interested in the comments of the hon. Member for Bournemouth, West (Mr. Butterfill) on the pensions industry. I agree that that is one of the industries that should be looking long term. People have their investments in their pensions and that involves a long period. We should accept that the short-term requirement of investment managers in that industry—to show how high up the performance league table they can come each year—causes concern, and militates against the long-term approach that should be taken.
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Some of the Bill's requirements are being considered in another place. The hon. Gentleman is right to say that they are a cause for concern in relation to the investment side of the pensions equation. I hope that, at some stage, consideration will be given to the potential effects of the legislation. The issue may have been lost in the concerns that people rightly have about people receiving a proper pension when they retire.
All the issues are being considered separately. It is generally accepted that a problem exists in relation to the equity gap, short-termism and the lack of investment, especially in small companies, and it is recognised that small companies will be the vehicle for growth and jobs—a growth in employment is likely to come from that sector—but where is the overall strategy to which the various mechanisms, ideas and suggestions may relate? That worries me. Where is the Government's overall approach, which identifies, deals with and proposes a range of measures that can be taken to deal with this real and pressing problem in the next few years?
Earlier, in response to the hon. Member for Orpington (Mr. Horam), my hon. Friend the Member for Monklands, East (Mrs. Liddell) drew attention to the fact that the proposal contains no specific assistance to companies that are just starting up. That omission should be dealt with. It would presumably be dealt with if the Government had an overall strategy that identifies the range of issues that need to be solved, and that produces a range of mechanisms and solutions to the problems. Many issues, such as that of start-ups, do not get a look in and are not properly dealt with because the Government approach the matter by producing one single mechanism and claim that it will address the equity gap problem.
Tax relief has been mentioned by a number of hon. Members. I do not think that Opposition Members are objecting to the principle of tax reliefs. However, it is our duty, as the Opposition, to raise the question of whether tax reliefs are effective. I agree to a great extent with some of the comments made by the hon. Member for Beaconsfield (Mr. Smith), but we must be careful, when dealing with tax reliefs, that we do not introduce to the market distortions whose impact we cannot predict.
In the Committee that considered the Finance Bill last year, the then Chief Secretary to the Treasury said that a good case had to be made for tax reliefs to be introduced, and that one had to be clear about what their impact would be. All too often, it is believed that tax reliefs can be introduced and that no real cost is involved.
If, however, the Government pay money in the form of grants or subsidies, they must be much more careful because such public expenditure is taxpayers' money.


Effectively, tax reliefs are exactly that. They use the public's money. As the hon. Member for Beaconsfield said, tax reliefs are someone else's tax increase or someone else's service cut, if the Government choose not to raise extra tax to fund the relief that they are introducing. We must be careful to ensure that we know what impact tax reliefs will have.
The Opposition's concern is that the scheme before us may generate a lot of activity. The Government are forecasting the tax relief level that they will take into account in their public expenditure accounts. The Opposition ask how one can be sure that that tax relief will achieve for the British people a benefit that makes the tax relief worth while. We have a right to ask that question and to receive a detailed answer to it.
How can we be sure that the schemes that are introduced will not generate an increase in the productive capacity of the economy and an increase in jobs? The schemes might lead simply to property development that is aimed, not at producing more manufacturing capacity, but at taking advantage of the tax relief. How can we be sure that, if the schemes improve and increase our manufacturing base, that would not have happened without the tax relief?
My hon. Friend the Member for Dudley, West (Mr. Pearson) made the point that venture capital is available for some schemes at present, so we cannot be sure that venture capital that would have gone into schemes before the change will not simply go into the same schemes, but with the benefit of tax relief. Those questions must be dealt with. The Government must convince us if we are to acknowledge that the scheme is worth while.
On VCTs, the Financial Times said:
The chancellor had barely sat down after last months's Budget before Rothschild Asset Management said it would set up a venture capital trust".
Two articles in the Financial Times used the words:
The chancellor had barely sat down".
If Rothschild Asset Management said that it would set up a venture capital trust when the Chancellor had "barely sat down", either it knew something about the nature of the scheme before the Chancellor's Budget speech—I would not like to imply that that was the case—or the scheme was such an obvious benefit in terms of tax relief and an easy make that the company got in before it considered the nature of investments. That is our worry. Such companies are not sitting down and examining the nature of the investment and whether it is a good risk, because they know that there is easy money to be made.
We become a bit more worried when, within a matter of weeks, an organisation that apparently believes that it is going to do very well out of the Government's scheme appoints a senior member of the governing party to its board. Somehow, that does not fit comfortably and easily with the Government's comment that the proposal is all about real jobs for real people in manufacturing. It is certainly about one job for one high-profile member of the Conservative party in an asset management company. It caused concern that that organisation believed so quickly that benefits existed.

Mr. Forman: On real jobs and the equation always with manufacturing, does the hon. Gentleman realise that

only 20 per cent. of all people employed are employed in the manufacturing sector? The difference is that they are producing a great deal more per man and per woman.

Mr. Betts: I accept that not all jobs are in the manufacturing sector and that many real jobs are in the service sector. I was questioning whether it was a real job when an ex-Minister was involved in activities in the House for the benefit of a certain organisation, and then got a job with that organisation. The term "real job" should not be applied to such a job.
Our concerns are reinforced by the fiasco of the business expansion scheme. We would be a lot more reassured if the Government, who introduced that much-derided scheme, had recognised the problems quickly and had done something about them quickly. Everyone else saw the problems with the BES. Everyone else could see that the money was going into property development. The Government, however, sat there for year after year, and Finance Bill debate after Finance Bill debate, and refused to act.
Therefore, we are naturally concerned when the same Government claim that their proposed new scheme will not be the same as the BES. They say that we will not have the same problems and that, if problems arise, they will act on them. What confidence can the Opposition have that the Government will be as good as their word, when we know from past experience about their reaction when property development was the name of the game, when the scheme was abused, and when no real risk existed because the scheme included guaranteed exits?
I accept that that particular loophole will be closed under the proposals, but property development is still a cause for concern. The property market may not be in a healthy state at the moment. It is interesting to hear Conservative Members talk about the impact of Government policies on that market but, unfortunately, it is not only they and some of their colleagues on the investment side but individual home owners who have suffered. Nevertheless, there is the possibility of a return to better days and the potential for the scheme to be abused.
The Government say that we should not worry because, as is too often the case, schedule 14(12) states:
The Treasury may by order amend this Schedule for any or all of the following purposes"—
that is, the businesses and trades that qualify for the purposes of venture capital trusts. Conservative Members may draw comfort from the fact that the Treasury can change the rules to deal with any anomalies or abuses but we worry that the Treasury, run by the Conservatives, might change the rules to benefit even further their friends who might be seeking tax relief and a quick buck through such a scheme. If the scheme can be altered one way—loopholes can be tightened—it can equally be altered in the opposite way without reference to the House. Pure speculation in land assets could be allowed through modification by the Treasury without reference to, or the approval of, hon. Members.
I also seek reassurance from the Financial Secretary on a matter that is not made clear in the Bill. Although there are limits on the amount that can be invested in one particular company by a venture capital trust, and although there is a limit to the assets of a company that can be owned by a venture capital trust—a limit of 15 per cent., as I understand it—is there anything to prevent two


venture capital trusts, owned by the same organisation, acting in concert and between them owning 30 per cent. of a particular company' assets? Or can an organisation establish more than one venture capital trust and, in so doing, breach the rules set out in the Bill for one VCT? If there is no such restriction, it means that there is a loophole and someone will walk through it before too long. I would appreciate the Financial Secretary's comments.
We are suggesting a two-year limit not because we believe that the scheme will not work but because previous Government action in this sphere leads us to be cautious. We want to be assured that there will be a proper monitoring arrangement and that Ministers will not walk away and pretend that everything will be fine once the legislation is passed; they must ensure that we get proper reports and that the Government are held to account for the expenditure of public money. That is absolutely right and proper.
The Financial Secretary has already forecast the amount of tax relief that he believes will be given under the scheme. We have a right to be concerned and ask who will benefit. Surely some assessment has been made of the income levels of those who will benefit. I do not say that because we are against people on high incomes and for those on low incomes. We are rightly concerned to ensure that when tax relief is offered and when potential benefits are available, it is not only one section of the community that receives them. Will such benefits be available for smaller investors? What is the Government's view at this stage of who will receive tax relief from VCTs when they are established? The Government have a duty to give us some idea of the work that they have done. What are their plans?
The Government have listed the industries and trades that will not qualify for investment under the scheme but where do they anticipate that the money will be invested? What part of our economy's capacity will be enhanced? How many and what sort of jobs will be created? Ministers will probably shrug and say that they do not have such information, but why not? It should be available if public money is being spent. If the Government were putting forward a scheme for grants, they would be able to explain the expenditure involved and the number of jobs to be created.

Mr. Butterfill: The hon. Gentleman must appreciate the fact that we do not know how much money is being spent until we know how much money is forthcoming. The two things are interrelated, so how can the Government possibly know?

Mr. Betts: The Government are proposing to spend public money on a large scale. They would be highly critical of us were we to propose such expenditure without being able to explain how it was to be spent and what the consequences were going to be. We are asking for strict monitoring of the scheme, and the two-year period is included in the amendment to establish a definite limit on the time within which information must be made available, not so that the scheme can be stopped but so that it can be reviewed to ascertain how effectively it is working. I hope that the Financial Secretary will take our suggestion seriously.
We are not saying that we want to stop the scheme but we have suspicions and concerns. Let the Government reassure us that they have planned how the scheme will

work and that there are to be proper reports and monitoring so that it can be amended in the event that it does not work as the Government claim that it will.

Mr. Mike O'Brien: It is common ground among the parties that there is a need for investment in small firms. The question is whether the venture capital trust is the best way to achieve it.
In its second report on finance for small firms, the Bank of England referred to the fact that bank finance available to small firms fell 5.1 per cent. to £37.2 billion between December 1993 and June 1994. As has already been said, the equity gap is a failure of the free market and VCTs are an attempt by the Government to intervene in the market to deal with that failure. It is interesting that the way in which the Government choose to intervene is by creating circumstances in which the well-off will pay less tax. That is certainly how the media have identified the prime appeal of the VCT—a big tax avoidance scheme. It is legal, but is it in the public interest?
On 15 January, the Observer ran a story with the headline "Taxfree Trusts for the Adventurous Investor". Most of the article was about the advantages available to the person who became involved with a VCT. In December 1994, the magazine Small Company Investor asked:
Will you need to pay capital gains tax again?
"Maybe not" was the answer. Media focus appears to be on the tax benefits, but the issue of the equity gap remains. The venture capital trust is at least an attempt by the Government to deal with it.
We need to help small businesses and to get the capital to them to create jobs and prosperity. In its report, the Bank of England raised the issue of how to do that. Those involved often find that it is not viable for venture capitalists to invest relatively small sums of equity. Typical professional venture capital investments are certainly in excess of £250,000 and early-stage and start-up finance, for example, accounted for only £69 million, or 6 per cent. of the total invested by British Venture Capital Association members in 1993. Clearly, therefore, we need a way to channel investment.
In its first report on financing small businesses, the Bank of England dealt with the role of the so-called "business angels", venture capital providers who link up with particular enterprises, often contributing their expertise and adopting a hands-on approach. However, the problem identified by the Bank of England is that, although banks such as NatWest have launched two pilots for national business angel networks, the majority of existing business introduction services remain fragmented and unco-ordinated. There are numerous business introduction magazines and, of course, the training and enterprise councils in different parts of the country provide services that are often useful. But we need a comprehensive business angel network to reduce costs and to simplify the process of making deals.
That leads me to the point made by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). The Government need to have a more comprehensive approach to the problem of small businesses, ensuring that the equity gap is bridged by not only looking at one solution to the problem but addressing issues such as the need for a business angel network. At the moment, the


Government have not shown that they are adopting a much broader approach. In his winding-up speech, will the Financial Secretary say what the Government are proposing to do about the business angel network?
There is clearly a need for investment and the question is whether venture capital trusts are the way in which to encourage it. I accept that it is right in certain cases to give tax breaks to encourage investment, but it is important that it is done with caution to ensure that the Exchequer uses those subsidies to best effect because, as Conservative Members have said, one person's tax concession is another person's tax increase. The business expansion scheme has raised questions about the use of tax breaks and the Government should therefore be prepared to answer openly and clearly questions about the way in which this new venture of theirs will deal with the concerns raised.
How much will the VCT scheme really cost? The Government estimate that it will cost £150 million in 1995–96, £290 million in 1996–97 and £240 million in 1997–98—a total cost of about £680 million. Does that include relief on capital gains tax and income tax relief? If the figures do not include those two, what is the overall figure? What is the actual loss to the Exchequer?
When the Government lost the vote on VAT on fuel, the Chancellor was most definite in the argument that, even if relatively small sums of tax were involved, it was essential that the Government should be able to account for them and say how that money was to be raised—hence the 4 per cent. increase in beer prices and the various other tax increases.
I have always taken the view, as I know the Chairman of the Public Accounts Committee has, that the loss from not imposing the VAT increase was probably within the margin of error of any Budget. After all, last year, the Chancellor must have had at least a margin of error of £4 billion because of the way in which the public sector borrowing requirement panned out. Given that the loss of revenue due to the VAT vote was much less, the Chancellor was well within the margin of error and need not have increased those taxes on beer and so on.
If the Chancellor felt that it was essential to come up with clear figures for the loss of revenue from extra VAT on fuel, surely he must provide clear figures of exactly how much money is being conceded in the VCT tax relief. Will the Financial Secretary also tell us what analysis the Government have done on the defects in the business expansion scheme? How can the faults that arose at various stages in that scheme, which required some remedy, be avoided in the VCT scheme? How will the Government ensure that?
Are such high tax concessions really necessary to get the venture capital trusts going? They are very large concessions and the Financial Secretary has not properly justified the size of them. Would not venture capital trusts be workable without such large tax concessions? That is a legitimate question that Labour Members should ask.
What calculations has the Treasury done on the possible diversion of capital that is currently invested in small businesses? If a person who is considering investing in a small business goes to his financial adviser to find out the best way in which to invest and says that he is thinking of becoming a business angel and getting

involved in direct investment, what risk is there that the financial adviser will tell him that, from a tax point of view, it is best to get involved in venture capital trusts and to try to get the tax concessions available?
The business would presumably have to apply to the venture capital trust scheme to get the investment that it needed and, obviously, judgments would have to be made by the venture capital trust investors. They may decide to invest in less risky businesses than the business in which the potential business angel was thinking of investing. Therefore, will the Financial Secretary state the Treasury's calculation of the potential diversion of investment? Again, that is a legitimate question that needs to be answered.
Will the Financial Secretary set out exactly which trades will qualify? The Bill says which trades will not qualify by excluding particular types of businesses. Will he try to define to some extent his target qualifying companies? Will he also set out clearly his thinking on venture capital trusts and property-backed schemes? He appears not to want entirely property-backed schemes and I accept that. He referred to those schemes in his earlier speech, but he did not set out clearly the Treasury's exact attitude to schemes that involved property. A great deal more detail is required.
What about residential homes for the aged? Does the Financial Secretary intend to include them in the scheme or to exclude them? It was not clear from his earlier reply exactly what his view was. He said, as I remember, that he had not had notice of many people seeking to exploit the venture capital trusts with residential homes in mind Is it his intention that the scheme would be available for such uses if people chose to use it for that purpose?
Does the Financial Secretary agree that the legislation is extremely complicated? While it appears that two investment trust groups, Murray Johnstone and Rothschild Investment Management, have said that they are interested in VCT, will not the complicated legislation deter investors from getting too involved in the scheme?
Why did the Government settle on restricting income tax relief to companies with initial growth assets of between £1 million and £10 million per annum? Why not extend the limits above and below those figures? There is greater availability of finance for the larger companies and we need to tackle the smaller-scale investment of around half a million pounds. Will the Government set out how they reached the conclusion that those two levels were appropriate, so that we may at least have some understanding of Government thinking?
The key issue for Labour Members is this: if the main focus of venture capital trusts becomes tax avoidance rather than investment, what will the Government do about it? Clearly, the media have identified venture capital trusts in that way so far. The Government must take into account why that has taken place. If it appears that VCTs will go the way of the business expansion scheme, how do the Government plan to deal with that?
I repeat that I agree that investment in small firms needs to be enhanced. The Government say in the Red Book that they intend to boost overall investment across the economy to 11 per cent. in the next year—a tremendous boost given that the current level is around 3 or 4 per cent. It is certainly nowhere near 11 per cent. That target of 11 per cent. has an awful lot of wishful thinking about it and a certain aura of unreality. Likewise, I suspect that


venture capital trusts embrace a combination of wishful thinking and a lack of reality about the market. That is why the amendment to limit venture capital trusts to two years initially gives us an important chance to review the scheme in future—an opportunity that the House ought to have.

Mr. Denis MacShane: In preparing myself for this interesting debate—I have enjoyed the exchanges—I turned to the spiritual father of venture capital in this country, Lord Lawson, the former Chancellor of the Exchequer. In his memoirs, he says that by 1993 the business expansion scheme and other start-up schemes had been brought to an end, which could be justified because
the UK had by then a venture capital industry equal to that of any in the world".
If that is the case and if, as the hon. Member for Carshalton (Mr. Forman) said, the Bank of England in the form of Mr. Pen Kent said yesterday that the banks are now far more co-operative, lending more generously and moving from overdrafts to loans, how come we need venture capital schemes? In the middle of what the Government say is a boom, with everything going unbelievably, wonderfully, incredibly well for the economy, how come we need the schemes?
7 pm
The term "tax break" has been used as often by Conservative Members as by Opposition Members in this debate on venture capital, so the queries raised by Opposition Members come into focus. If I may paraphrase Humbert Wolfe after Hilaire Belloc
You shouldn't need to bribe or twist
The British venture capitalist
Just provide a tax break or two
And you will see what he can do".
There is a problem in my constituency, and the deputy chairman of the Conservative party, Mr. John Maples, who was heavily involved in the Wellington BES in the 1980s, is giving evidence in a court case involving a lot of people who lost their jobs. Mr. Maples advised Virginia Wade, Michael Parkinson and others to put their money into a scheme and it has now emerged that a great deal of money has been lost.
Conservative Members have said that venture capital initiatives often become adventure capital initiatives, and although it is hoped that real money may be made, a lot of money can be lost, too. The core lesson of the 1980s was that we need more supervision. What worries some Opposition Members is not the tax write-offs for the deputy chairman of the Conservative party or for rich sport and television personalities, but cases such as that in Rotherham, where 55 people lost their jobs and are now on the dole without any security at all.
If we have identified an equity gap—what the Macmillan committee as long ago as 1929 called the finance gap—it needs to be dealt with, but Opposition Members have genuine reservations about whether the venture capital proposals in the Bill will do that. I certainly want more investment in Rotherham, but I am in regular contact with Rotherham business men, with the economic partnership and with Business Link, and they all tell me that venture capitalists need to target the lower end of the market.
Apparently, venture capitalists have little interest in the kinds of small businesses that want to get going in Rotherham. They need a quicker turnround. There seems to be some contradiction in the debate, because although it seems that, even before the Chancellor sat down after his Budget speech, Rothschild was ready to put a venture capital trust into operation, Conservative Members who are experts and have declared their interest have said that such schemes take a year or two years to get going. The message from Rotherham is, please can that be done quickly and at a much lower cost?
In my constituency I have been told that the venture capital trusts do not have a customer-friendly feel to them. The rate of return that they expect—generally 30 per cent.—is very high, which illustrates the short-termism and the lack of what is known as patient or stakeholder capitalism, whether venture or otherwise, in the United Kingdom economy. Indeed, as has already been said, in 1992 as much as 60 per cent. of NatWest's lending, excluding personal mortgages, was for less than one year. That shows the impatience and the "wham, bam, get out" approach of so many lending institutions in this country. My constituents in Rotherham are affected by all that.
It is not only the review period that is missing—although if Mr. Maples is planning to put more money into the new schemes being set up, let us have a review so that he and other investors can be protected. We also need venture capitalists much closer to the base where British business has to be carried out.
It is interesting that all the Conservative Members who have spoken have lived within commuting distance of the City. I should like there to be some form of ring-fencing that would help to turn venture capital trusts towards the needs of the regions. Every other country has regional banks in some form. The United States, which was the source of venture capital trusts before they were put into effect in this country, has laws which do not allow banks to operate outside their own state. There is no all-American venture capital trust industry, but a Californian industry, an Oregon industry, one in Texas, one in Massachusetts, and so on. That is what we desperately lack—an orientation that will take the money outside the hothouse growth areas protected by the Government, notably in the south-east.
We could also consider the activities of the Prince of Wales's Youth Business Trust, which does wonderful work in Rotherham. The prince is responsible for 17,500 start-ups in Rotherham, at exactly that small business level, with perhaps one or two individuals trying to make a go of it. Those are people such as the managers leaving a company who were mentioned by the hon. Member for Bournemouth, West (Mr. Butterfill), and those who have lost their jobs and have the initiative and the get-up-and-go to start out on their own. On the whole I am a republican, but I find it strange that we have to turn to the royal family to get small businesses going in this country because the banks and the venture capitalists have let them down so disastrously.
Finally, we could consider introducing an export element into the equation. I am struck by what happened in Korea in the 1970s and 1980s when no company, whatever its size, got credit unless it could prove that


there was an export element in its business. I am not sure whether that would be possible, but perhaps we could think about it for a future Finance Bill.

Mr. Malcolm Chisholm: Every time I have spoken in the House in the past two weeks I have been asked to be brief. I hope that that is because I have been speaking towards the end of debates, and not for any other reason.
The Opposition have a record of real concern about investment in our economy, the lack of which is one of the main problems, if not the most important problem, in the economy now. We are therefore interested in any measures designed to increase investment, including investment in small businesses. However, we have at least four concerns about the proposal before us.
Our first concern is the sheer scale of tax reliefs available and the consequent loss of money to the Exchequer. We are told that that will be £680 million over the next three years, but that calculation assumed 27 per cent. tax relief, and it has already been asked whether that was an underestimate. The amount of tax relief available is astounding. Initially it can be up to 60 per cent.—that actually applies to £200,000, because although a person can invest no more than £100,000 in a venture capital trust the same person can also put £100,000 into an enterprise investment scheme. On Second Reading I quoted from "BESt Investment", which was full of exclamation marks because it could not believe how many tax reliefs and tax breaks there would be. It asked whether anybody would ever have to pay capital gains tax again.
Secondly, we worry about the type of investment into which the money will go. It has been said that much venture capital money goes into management buy-outs, and those do not appear to be excluded. However, an even more serious worry exists about property, which was mentioned by various hon. Members. An explanation was given by the Financial Secretary of the abolition of the interest in land rule, but we are still worried about the type of companies that will now be brought in—companies that will have a big interest in land and property. As other hon. Members said, there is no specific exclusion of property. Why is there not? People will be suspicious that that is what the money will be used for if a specific exclusion is not written in.
It is also a fact that only 70 per cent. of the money has to go into qualifying holdings, so 30 per cent. of the money can be invested in literally anything, whether in this country or abroad. That is surely unacceptable when there is massive tax relief.
The third worry is about the displacement effect. Will the money go into the new investments and come out of other investments? My hon. Friend the Member for Oxford, East (Mr. Smith) quoted from a magazine Small Company Investor, which graphically illustrated how experts thought that money would go into property-related investments and come out of the small businesses which needed it.
The fourth worry is about whether investment will be targeted at the companies that need it. That was first mentioned by my hon. Friend the Member for Dudley, West (Mr. Pearson), who is an expert in those matters. He said that the companies that needed help were the ones that were starting up—the small companies. He asked

why the £1 million limit and the £10 million limit were not reduced, because investment was not properly targeted.
I fear that that badly targeted device is all that appears to have emerged from the great review about which we heard last year of ways to channel savings into investment. The key problem remains of how small companies can obtain long-term finance—long-term loans. Other major investment issues are totally ignored by the Finance Bill.
I suppose that we should be grateful that we have got anything, because in the Budget, when he argued against capital allowances, the Chancellor said that he did not think that we should distort investment decisions. I am all in favour of distorting investment decisions when investment is not being made, but I am afraid that this measure is the only thing that is included in the Finance Bill. The rest of the Bill is a vacuum. We should have measures to encourage investment throughout the economy. The missing subject is dividends, which the previous Financial Secretary was considering until Lord Hanson told the Government that he was a socialist; then he stopped doing it.
I urge hon. Members to support our amendments tonight, because they provide that, if the measure goes through, at least we shall be able to review it in a couple of years' time and discover how it is working. We are also asking for specific exclusions of property, so that we do not create a second business expansion scheme.

Mr. Alistair Darling: I am grateful to my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm). The reason why we ask him to be brief is that we know that he can make his arguments extremely well briefly, which he does time and again——and I say that not only because he happens to be one of my next-door neighbours in an Edinburgh constituency.
The debate has been extremely useful. On few occasions that I have witnessed in the eight years I have been a Member has the House spent so much time discussing directly problems which affect so many of our constituents, and also a problem that is fundamental to the future development of the economy.
There is no difference between the two sides of the House on the principle of venture capital trusts. We all agree that it is desirable, and from time to time necessary, to use fiscal incentives to ensure that investments are made in the sectors where we need it.
The difference between us is threefold. First, we believe that the Government need to consider other sectors, which have been mentioned on both sides of the House. Secondly, we believe that there must be safeguards to ensure that, if one gives a tax incentive, one does not end up subsidising undesirable behaviour, such as the behaviour that occurred when the business expansion scheme was set up. In that respect, too, there was common ground on both sides of the House. The difference between the two sides is that those who support the Government do not appear to accept that there is a case for ensuring that there should be safeguards in relation to venture capital trusts.
I suppose that the third difference between us is that we believe that the Government have given fiscal incentives in undesirable ways, such as the business


expansion scheme, but the Government will not accept that the taxpayer's money has thereby been poured down the drain. I shall perhaps discuss that later.
7.15 pm
The Minister appeared reluctant to accept that there is no difference of principle between us, so we should perhaps not spend too much time trying to make differences where none exist. Perhaps British industry as a whole will welcome the fact that there is cross-party support for the principle of encouraging investment in what is known as the investment gap, which has been identified by almost every hon. Member who has contributed to the debate.
However, I took exception when the Minister said that because no one was focusing on granny farms, as he put it, that was all right. In support of his proposition, he cited the fact that Rothschild's supported the Government. What a surprise—Rothschild's supports the Government. I am sure that a bank such as Rothschild's, which has no fewer than 14 times been the recipient of public largesse, either as an adviser to the Government or as an underwriter of its flotation schemes, should say, "Well done the Government for coming up with that scheme."
Indeed, as my hon. Friends the Member for Sheffield, Attercliffe (Mr. Betts) and for Rotherham (Mr. MacShane) said, if venture capitalists do take great care in assessing the risks and evaluating the projects before them, it is scarcely surprising that the Chancellor hardly sat down after his Budget statement before our old chums at Rothschild's announced that they were going to set up a venture capital trust. They could not have known what was in the Budget, could they? How on earth would they know what a surefire bet it was—unless, of course, they had the amazing foresight of the noble Lord Archer of Weston-super-Mare?How could Rothschild's say so confidently that it was going to set up a venture capital trust unless it had made an evaluation of the type of tax breaks available and knew that, no matter what the risk, no matter what venture it backed, it was guaranteed to obtain a suitable return?
I do not think that the Minister can rely on Rothschild's for support, therefore, and I believe that both he and Conservative Members generally, today of all days, would do well to be very quiet about Rothschild's and the Conservative party, for reasons that people outside and inside the House will understand.
The main subject to which successive hon. Members drew attention was the funding gap between quoted companies and small businesses, many of which are funded by family money or by bank overdraft. As my hon. Friend the Member for Dudley, West (Mr. Pearson) said, that is starting to change; nevertheless, there is obviously a funding gap and we welcome the fact that the Government are tackling it.
I want to take up an argument that the hon. Member for Gordon (Mr. Bruce) made about property. I think that we all accept that if inflation remains low—a big "if'—obviously property will not be the kind of bet that it was in the past 30 or 40 years. However, in my travels around the City of London I have been surprised how many people tell me that they are getting back into property again. We all remember the property collapses of the 1970s, the late 1980s and the early 1990s; yet people are getting back into property because it is regarded as a major asset in a portfolio.
I do not think that we can take it for granted that, simply because inflation is low at the moment, the bad examples that the BES scheme threw up when it was in force will not return. I think that the hon. Member for Bournemouth, West (Mr. Butterfill) conceded as much in his contribution. Although he said that he believed that it was unlikely that property speculation would become a problem again, none of us can rely on that being the case for ever. That appears to be another reason to support the Opposition amendment, which says that we should review the scheme in a couple of years' time.
Several Conservative Members have said that two years is not long enough to evaluate the schemes, and I accept that. I am not asking for schemes to be considered after two years, but obviously in the two-year period we shall have a pretty good idea if we notice the bad old habits re-emerging. If, as we have suggested, and on the basis of the many articles that have been mentioned, people do regard the scheme as a honeypot for tax avoidance and if we notice bad habits returning, it is surely right to ensure that taxpayers' money is not used to subsidise wholly undesirable behaviour.
As Conservative Members never tire of telling us, it is not the Government's money, but the taxpayer's money. They should think long and hard about using taxpayers' money to subsidise behaviour that most Members on both sides of the House find objectionable. Granny farming is not an activity that should be encouraged in general, and it certainly should not be encouraged by subsidy.
It was interesting that the hon. Member for Orpington (Mr. Horam) and my hon. Friend the Member for Monklands, East (Mrs. Liddell) made similar arguments. I wondered whether the hon. Member for Orpington was having second, or perhaps third thoughts, and reverting to his original beliefs as he rightly drew attention to the fact that there is a problem with start-up finance, as did my hon. Friend the Member for Monklands, East, who has considerable experience in that sector. The hon. Member for Orpington argued that it is sometimes difficult to obtain funding for projects of less than £2 million.
I have an annual debate with the hon. Member for Bournemouth, West on the subject of his various interests. Each year, he is a member of the Finance Committee. I would advise him not to make the British Venture Capital Association his only port of call as the authority that no business need go without funds. Of course, that association has a view, but it is not the only one. As has been said, there is a funding gap and the Government should tackle that problem.

Mr. Butterfill: I am sure that when he reads my speech carefully the hon. Gentleman will see that I did not make that association my only point of reference. I referred specifically to the report of the Select Committee on Trade and Industry—of which I am a member—which looked into the matter in great depth.

Mr. Darling: The hon. Gentleman mentioned one or two other points, but he put considerable weight on that association. However, we shall return to the subject.
As usual, the hon. Member for Carshalton and Wallington (Mr. Forman) made an informed and highly enjoyable speech—apart from the silly crocodile tears that he wept over whether we were new or old Labour or new or old Liberal. Closing tax loopholes is a matter of right or wrong, not new or old. Our concern is not to open a mammoth tax loophole without adequate safeguards.
I emphasise that we all agree that Government intervention may be necessary where there is market failure. We must surely all also agree, however, that if fiscal incentives are to be used it is essential for the Government to ensure that those incentives achieve their intended aim and are not abused. That was the point behind the campaign launched by Labour to close tax loopholes. We are not against high rewards for those who undertake high risks, but we are against high rewards for low risk.
I commend to the Minister the contribution of my hon. Friend the Member for Dudley, West, who knows a thing or two about such matters. I also commend to him the suggestions made by others of my hon. Friends, including my hon. Friends the Members for Warwickshire, North (Mr. O'Brien) and for Rotherham.
One or two hon. Members spoke about the tax avoidance industry. I wish that Conservative Members would pay more attention to that industry. Tax avoidance is wholly legitimate; we are all entitled to reduce our tax bills and are obliged to render unto Caesar only that which is due to Caesar. That does not mean that we should help the tax avoidance industry. Conservative Members sometimes seem to regard that industry like piracy: it demonstrates the entrepreneurial spirit and they cannot bring themselves to criticise it or get in its way.

Mr. Forman: Does the hon. Gentleman recognise that it is the very complexity of many Finance Bills which creates the opportunities that many of us wish to eliminate?

Mr. Darling: Absolutely. Although it is not a declarable interest, I am happy to declare a sort of interest in that I am a member of the Institute for Fiscal Studies committee set up to examine the complexities of taxation. I cannot remember which Conservative Member represents that party on the committee.

Mr. Andrew Smith: My hon. Friend can sort out all the complexities.

Mr. Darling: My response to the sedentary intervention of my good colleague the shadow Chief Secretary is that I am not going to sort them all out myself: I shall report back to him so that he can sort it out in two years' time when he is sitting in the Treasury along with the Japanese tourists or whoever else happens to populate it then.
The need for investment in this country is crucial—no one has denied that—but I wish to return to the issue which appears to separate the two sides: the need for safeguards. Conservative Members and the Minister said that we should not pay too much attention to what happened with the business expansion scheme. I have a quotation on which the Minister might wish to reflect. It comes from an interesting speech that was made a couple of years ago. It states:
Think back six years. The yuppie revolution was in full swing . . . But it was built on sand. The wheeler-dealer was the man of the moment. The best returns were to be found in trading financial assets. Demand for property seemed inexhaustible. Money inevitably flowed towards these apparently sure-fire winners. But the system"—
the business expansion scheme—

was giving the wrong signals. Far from being sure-fire winners, many were, in fact, sure-fire losers. We can see them today marked by To Let boards outside brand-new buildings that will never make a return for the people who built them.
The absence of a proper return matters to the developer, but it also matters to the rest of us, because the resources that were attracted, like moths to a lamp-bulb, to the lure of easy money are resources that have been wasted.
No one in the Labour party said that. Conservative Members will remember who said it, because it was none other than the Secretary of State for National Heritage when he was Financial Secretary to the Treasury.
Conservative Members may wish to reflect on the fact that those words were said by a member of the Cabinet, and perhaps one of the most decent and informed people to be sidelined in the Cabinet reshuffle. Indeed, he may have been sidelined not only because he set up a committee to look into the long-term and short-term attitudes in the City, before Lord Hanson said that that had to stop, but because he was astute enough to say that resources that were attracted
like moths to a lamp-bulb, to the lure of easy money
have been wasted. The case is made for our amendment by a member of the Conservative Cabinet. Conservative Members can surely learn from the mistakes that they made quite recently—not long ago in their 16-year span—with the business expansion scheme.
We are anxious to ensure that investment and entrepreneurial spirit is encouraged and that where there is a gap in the market the Government use all their powers to fill it, but we cannot and will not support a device which is likely to give rise to yet another tax break. I suspect that the present Government are responsible for creating more tax breaks than any other Government in history. That is partly because some Conservatives are, by inclination, attracted to such breaks and partly because some of them have connections with people in the tax avoidance industry.
The public interest demands that if public money is to be spent there must be safeguards in the public interest to ensure that money is directed to those sectors which need investment and have a high risk. They could include high-tech sectors and the very sectors in which Britain has not, historically, been able to compete. It seems that hon. Members on both sides of the House have tonight recognised that gap and the fact that far more needs to be done.
With our amendment we are merely asking for an assurance that the Government will not create a huge tax break for people who do not deserve it. Conservative Members are right to say that people are entitled to take advantage of the tax system, but it should never be a function of the Government or of the House simply to nod something through while knowing full well that there is a substantial risk that it will create the mother of all tax breaks. It is for that reason that we tabled our amendment.

Mr. Malcolm Bruce: I wish to press the Minister on the subject of property. The issue has been debated, but I am not convinced that all aspects of it have been taken into account. We are trying to ensure that, at the start, the right signals are given to show that venture capital trusts are designed to divert money, by tax efficient means, into productive investment.
Despite the debate about the state of the property market and the intervention of one or two Conservative Members, I must repeat that the problem in the past has


been that investing simply in the management of existing properties on the basis of speculation about their value, while it may be a perfectly legitimate business and has, at times, been profitable, does not add to the sum total of real wealth. However, it can be the source of a great deal of attracted, diverted, tax-ubsidised investment.
The property market is currently in a more complex state than it has been for some time. One cannot say that the property market is globally depressed, as some sectors are performing reasonably well. There is no doubt that a well-managed property portfolio has every prospect of attracting a return that is significantly better than the rate of inflation. That being so, clearly the added benefit of a tax incentive is likely to encourage the promotion of more such portfolios.
In recent years, I have been a very small investor in a unit trust-related property fund which, throughout the recession, has not only out-performed the property market but out-performed the general index, even in the depths of the property recession. It did so because it was astutely managed and well targeted. I do not criticise that, but I criticise the fact that such funds should be encouraged for purely tax-relief purposes.
An ironic, contradictory, but equally valid point is that a tax incentive might provide the reassurance to secure a property portfolio and give it extra underpinning. Having a tax investment built in might allow people to hedge their bets. On both counts, I think that the Government are in danger of opening up a very good scheme to speculative investment which will be unproductive and which could divert a great deal of money away from the Treasury and from the businesses which need it. For that reason, I believe that the Committee should accept the amendment, and I hope that the Government will rethink their position.

Sir George Young: I agree with the hon. Member for Edinburgh, Central (Mr. Darling): it has been a good debate, with hon. Members starting from the common position that there is a problem which needs to be addressed. I shall deal with the major questions raised during the debate and I write to those hon. Members whose questions I do not reply to directly.
The hon. Member for Edinburgh, Central referred to my right hon. Friend the Secretary of State for National Heritage who was, quite rightly, promoted from the Treasury to the Cabinet in the July reshuffle. His reference to my right hon. Friend being "sidelined" is one of the most preposterous things that I have heard in the Chamber for many years. I hope that the hon. Gentleman will be "sidelined" in due course—if that is how he interprets it.
I agree with some of the things that the hon. Member for Gordon (Mr. Bruce) said. There has been a cultural shift, but there has also been a change in the perception of property and property development in the past 10 years. That is one reason why investments are less likely to go into those sectors. I shall return to that matter in a moment.
On his point about the interest in the land issue, perhaps the hon. Gentleman should read the Revenue Law Committee memorandum written by the Law Society entitled "Revenue Law Reform". It states:
Many bona fide trading companies, although not property-based, will not satisfy the requirement that the value of their interest in land does not exceed half the value of the company's assets as a

whole. Further, although the test may initially be satisfied, it may inadvertently be breached subsequently during the relevant period. Although the effect will be to exclude asset-backed companies, the restrictions will extend more widely than this".
In other words, it says that the rule which the hon. Gentleman wants to apply could exclude a company manufacturing widgets which happens to own its own factory. That cannot be right.
My hon. Friend the Member for Orpington (Mr. Horam) identified the opportunities for small companies presented by the structural changes in the economy. He will be reassured to know that the enterprise investment scheme has already provided help for start-ups. Approximately 30 per cent. of schemes funded so far under the EIS have been start-ups, and they have raised an average of £80,000, which hits the target that my hon. Friend identified.
The hon. Member for Monklands, East (Mrs. Liddell) asked why there was nothing in the Bill to help business angels. That assistance was provided in the Finance Act 1994 which introduced the enterprise investment scheme designed specifically for business angels. The hon. Lady is quite right: there is a role for them, but I think that their role is focused more accurately on the EIS rather than on the venture capital trust scheme in this Finance Bill. More than 50 per cent. of the enterprise investment schemes reported to Inland Revenue have involved business angels.
I am afraid that the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) is just unreconstructed. There is a risk of being committed in theory to the principle of VCTs but then undermining and qualifying that commitment to such an extent that one is left with very little.
My hon. Friends the Members for Carshalton and Wallington (Mr. Forman) and for Bournemouth, West (Mr. Butterfill) made informed speeches correctly identifying the gap in funding that the VCT meets. I shall respond to their anxiety—I think that it was the main anxiety to come through the debate—about what we shall do if the investment goes into schemes about which hon. Members have expressed reservations.
I can tell the Committee, and in particular my hon. Friend the Member for Bournemouth, West, that we shall keep the VCT scheme under close review. If there is evidence of the scheme being used for tax avoidance purposes or if a disproportionate amount of funds is invested in low-risk activities we shall not hesitate to take action to prevent that occurring. We shall make immediate use of the power included in schedule 14 to add to the list of non-qualifying activities if the need arises. I hope that that also gives some comfort to the hon. Member for Gordon.
The hon. Member for Dudley, West (Mr. Pearson) asked a number of questions and I think it will be easier if I reply to him in writing as some of them were highly technical and the Committee would like to make progress.
There have been extensive consultations about the scheme. It is a worthwhile proposal which has been welcomed by those who will operate it. There is a real need for small businesses to access the funds and I think that the Committee should make progress and put the scheme into action.

Question put, That the amendment be made:—
The Committee divided: Ayes 242, Noes 321.

Division No. 49]
[7.34 pm


AYES


Adams, Mrs Irene
Field, Frank (Birkenhead)


Ainger, Nick
Fisher, Mark


Ainsworth, Robert (Cov'try NE)
Flynn, Paul


Allen, Graham
Foster, Rt Hon Derek


Anderson, Donald (Swansea E)
Foulkes, George


Anderson, Ms Janet (Ros'dale)
Fraser, John


Armstrong, Hilary
Fyfe, Maria


Ashton, Joe
Galbraith, Sam


Barnes, Harry
Galloway, George


Baron, Kevin
Gapes, Mike


Battle, John
George, Bruce


Bayley, Hugh
Gerrard, Neil


Beckett, Rt Hon Margaret
Gilbert, Rt Hon Dr John


Bell, Stuart
Godman, Dr Norman A


Benn, Rt Hon Tony
Godsiff, Roger


Bennett, Andrew F
Golding, Mrs Llin


Benton, Joe
Gordon, Mildred


Bermingham, Gerald
Graham, Thomas


Berry, Roger
Grant Bernie (Tottenham)


Betts, Clive
Griffiths, Nigel (Edinburgh S)


Blair, Rt Hon Tony
Griffiths, Win (Bridgend)


Blunkett, David
Grocott, Bruce


Boateng, Paul
Gunnell, John


Boyes, Roland
Hall, Mike


Bradley, Keith
Hanson, David


Bray, Dr Jeremy
Hardy, Peter


Brown, N (N'c'tle upon Tyne E)
Harman, Ms Harriet


Burden, Richard
Hattersley, Rt Hon Roy


Byers, Stephen
Henderson, Doug


Caborn, Richard
Heppell, John


Callaghan, Jim
Hill, Keith (Streatham)


Campbell, Mrs Anne (C'bridge)
Hinchliffe, David


Campbell, Ronnie (Blyth V)
Hodge, Margaret


Campbell-Savours, D N
Hoey, Kate


Canavan, Dennis
Home Robertson, John


Cann, Jamie
Hood, Jimmy


Chisholm, Malcolm
Hoon, Geoffrey


Church, Judith
Howarth, George (Knowsley North)


Clapham, Michael
Howells, Dr. Kim (Pontypridd)


Clarke, Eric (Midlothian)
Hoyle, Doug


Clelland, David
Hughes, Kevin (Doncaster N)


Clwyd, Mrs Ann
Hughes, Robert (Aberdeen N)


Coffey, Ann
Hughes, Roy (Newport E)


Cohen, Harry
Hutton, John


Connarty, Michael
Illsley, Eric


Corbett, Robin
Ingram, Adam


Corbyn, Jeremy
Jackson, Glenda (H'stead)


Corston, Jean
Jackson, Helen (Shef'ld, H)


Cousins, Jim
Jamieson, David


Cox, Tom
Janner, Greville


Cummings, John
Jones, Barry (Alyn and D'side)


Cunliffe, Lawrence
Jones, Lynne (B'ham S O)


Cunningham, Jim (Covy SE)
Jones, Martyn (Clwyd, SW)


Cunningham, Rt Hon Dr John
Kaufman, Rt Hon Gerald


Dalyell, Tam
Keen, Alan


Darling, Alistair
Kennedy, Jane (Lpool Brdgn)


Davidson, Ian
Khabra, Piara S


Davies, Bryan (Oldham C'tral)
Kilfoyle, Peter


Davies, Rt Hon Denzil (Llanelli)
Lestor, Joan (Eccles)


Davies, Ron (Caerphilly)
Lewis, Terry


Denham, John
Liddell, Mrs Helen


Dixon, Don
Litherland, Robert


Dobson, Frank
Lloyd, Tony (Stretford)


Donohoe, Brian H
Llwyd, Elfyn


Dowd, Jim
Loyden, Eddie


Dunnachie, Jimmy
McAllion, John


Dunwoody, Mrs Gwyneth
McAvoy, Thomas


Eagle, Ms Angela
McCartney, Ian


Enright, Derek
Macdonald, Calum


Etherington, Bill
McFall, John


Evans, John (St Helens N)
McKelvey, William


Ewing, Mrs Margaret
Mackinlay, Andrew


Fatchett, Derek
McMaster, Gordon





McNamara, Kevin
Rooney, Terry


MacShane, Denis
Ross, Ernie (Dundee W)


McWilliam, John
Rowlands, Ted


Madden, Max
Ruddock, Joan


Mahon, Alice
Salmond, Alex


Mandelson, Peter
Sheerman, Barry


Marshall, David (Shettleston)
Sheldon, Rt Hon Robert


Marshall, Jim (Leicester, S)
Shore, Rt Hon Peter


Martlew, Eric
Short, Clare


Maxton, John
Simpson, Alan


Meacher, Michael
Skinner, Dennis


Meale, Alan
Smith, Andrew (Oxford E)


Michael, Alun
Smith, Llew (Blaenau Gwent)


Michie, Bill (Sheffield Heeley)
Soley, Clive


Milburn, Alan
Spearing, Nigel


Miller, Andrew
Spellar, John


Mitchell, Austin (Gt Grimsby)
Squire, Rachel (Dunfermline W)


Moonie, Dr Lewis
Steinberg, Gerry


Morley, Elliot
Stevenson, George


Morris, Rt Hon Alfred (Wy'nshawe)
Stott, Roger


Morris, Estelle (B'ham Yardley)
Strang, Dr. Gavin


Morris, Rt Hon John (Aberavon)
Straw, Jack


Mowlam, Marjorie
Sutcliffe, Gerry


Mudie, George
Taylor, Mrs Ann (Dewsbury)


Mullin, Chris
Thompson, Jack (Wansbeck)


Oakes, Rt Hon Gordon
Timms, Stephen


O'Brien, Mike (N W'kshire)
Tipping, Paddy


O'Brien, William (Normanton)
Turner, Dennis


O'Hara, Edward
Vaz, Keith


Olner, Bill
Walker, Rt Hon Sir Harold


O'Neill, Martin
Walley, Joan


Orme, Rt Hon Stanley
Wardell, Gareth (Gower)


Pearson, Ian
Wareing, Robert N


Pickthall, Colin
Watson, Mike


Pike, Peter L
Welsh, Andrew


Pope, Greg
Wicks, Malcolm


Powell, Ray (Ogmore)
Wigley, Dafydd


Prentice, Bridget (Lew'm E)
Williams, Rt Hon Alan (Sw'n W)


Prentice, Gordon (Pendle)
Williams, Alan W. (Carmarthen)


Prescott, Rt Hon John
Wilson, Brian


Primarolo, Dawn
Winnick, David


Purchase, Ken
Wise, Audrey


Randall, Stuart
Worthington, Tony


Raynsford, Nick
Wray, Jimmy


Reid, Dr John
Wright, Dr Tony


Robertson, George (Hamilton)
Young, David (Bolton SE)


Robinson, Geoffrey (Co'try NW)



Roche, Mrs Barbara
Tellers for the Ayes:


Rogers, Allan
Mr. Jon Owen Jones and


Rooker, Jeff
Ms Tessa Jowell


NOES


Ainsworth, Peter (East Surrey)
Biffen, R Hon John


Aitken, Rt Hon Jonathan
Body, Sir Richard


Alexander, Richard
Bonsor, Sir Nicholas


Alison, Rt Hon Michael (Selby)
Booth, Hartley


Allason, Rupert (Torbay)
Boswell, Tim


Alton, David
Bottomley, Peter (Eltham)


Amess, David
Bottomley, Rt Hon Virginia


Arbuthnot, James
Bowis, John


Arnold, Jacques (Gravesham)
Boyson, Rt Hon Sir Rhodes


Arnold, Sir Thomas (Hazel Grv)
Brandreth, Gyles


Ashby, David
Brazier, Julian


Atkins, Robert
Bright, Sir Graham


Atkinson, Peter (Hexham)
Brooke, Rt Hon Peter


Baker, Rt Hon Kenneth (Mole V)
Brown, M (Brigg  Cl'thorpes)


Baker, Nicholas (North Dorset)
Browning, Mrs Angela


Baldry, Tony
Bruce, Ian (Dorset)


Banks, Matthew (Southport)
Bruce, Malcolm (Gordon)


Banks, Robert (Harrogate)
Burns, Simon


Bates, Michael
Burt, Alistair


Batiste, Spencer
Butcher, John


Beith, Rt Hon A J
Butler, Peter


Bellingham, Henry
Butterfill, John


Bendall, Vivian
Campbell, Menzies (Fife NE)


Beresford, Sir Paul
Carlile, Alexander (Montgomery)






Carlisle, John (Luton North)
Hampson, Dr Keith


Carlisle, Sir Kenneth (Lincoln)
Hanley, Rt Hon Jeremy


Carrington, Matthew
Hannam, Sir John


Carttiss, Michael
Hargreaves, Andrew


Cash, William
Harris, David


Channon, Rt Hon Paul
Harvey, Nick


Chapman, Sydney
Haselhurst, Alan


Chidgey, David
Hawkins, Nick


Churchill, Mr
Hawksley, Warren


Clappison, James
Hayes, Jerry


Clark, Dr Michael (Rochford)
Heald, Oliver


Clarke, Rt Hon Kenneth (Ru'clif)
Heath, Rt Hon Sir Edward


Clifton-Brown, Geoffrey
Heathcoat-Amory, David


Coe, Sebastian
Hendry, Charles


Colvin, Michael
Hicks, Robert


Congdon, David
Higgins, Rt Hon Sir Terence


Coombs, Anthony (Wyre Forest)
Hill, James (Southampton Test)


Coombs, Simon (Swindon)
Horam, John


Cope, Rt Hon Sir John
Hordern, Rt Hon Sir Peter


Couchman, James
Howard, Rt Hon Michael


Cran, James
Howarth, Alan (Strat'rd-on-A)


Currie, Mrs Edwina (S D'by'ire)
Howell, Sir Ralph (N Norfolk)


Curry, David (Skipton  Ripon)
Hughes, Robert G (Harrow W)


Davis, David (Boothferry)
Hughes, Simon (Southwark)


Day, Stephen
Hunt, Rt Hon David (Wirral W)


Deva, Nirj Joseph
Hunt, Sir John (Ravensbourne)


Delvin, Tim
Hunter, Andrew


Dicks, Terry
Hurd, Rt Hon Douglas


Dorrell, Rt Hon Stephen
Jack, Michael


Douglas-Hamilton, Lord James
Jackson, Robert (Wantage)


Dover, Den
Jenkin, Bernard


Duncan, Alan
Jessel, Toby


Duncan Smith, Iain
Johnson Smith, Sir Geoffrey


Dunn, Bob
Johnston, Sir Russell


Durant, Sir Anthony
Jones, Gwilym (Cardiff N)


Dykes, Hugh
Jones, Nigel (Cheltenham)


Eggar, Rt Hon Tim
Jones, Robert B (W Hertfdshr)


Elletson, Harold
Jopling, Rt Hon Michael


Emery, Rt Hon Sir Peter
Kellett-Bowman, Dame Elaine


Evans, David (Welwyn Hatfield)
Kennedy, Charles (Ross, CS)


Evans, Jonathan (Brecon)
Key, Robert


Evans, Nigel (Ribble Valley)
Kilfedder, Sir James


Evans, Roger (Monmouth)
King, Rt Hon Tom


Evennett, David
Kirkhope, Timothy


Faber, David
Kirkwood, Archy


Fabricant, Michael
Knapman, Roger


Fenner, Dame Peggy
Knight, Mrs Angela (Erewash)


Field, Barry (Isle of Wight)
Knight, Greg (Derby N)


Fishburn, Dudley
Knight, Dame Jill (Bir'm E'st'n)


Forman, Nigel
Knox, Sir David


Forth, Eric
Kynoch, George (Kincardine)


Foster, Don (Bath)
Lait, Mrs Jacqui


Fowler, Rt Hon Sir Norman
Lamont, Rt Hon Norman


Fox, Sir Marcus (Shipley)
Lang, Rt Hon Ian


Freeman, Rt Hon Roger
Lawrence, Sir Ivan


French, Douglas
Legg, Barry


Gale, Roger
Leigh, Edward


Gallie, Phil
Lennox-Boyd, Sir Mark


Gardiner, Sir George
Lester, Jim (Broxtowe)


Garel-Jones, Rt Hon Tristan
Lidington, David


Garnier, Edward
Lightbown, David


Gill, Christopher
Lilley, Rt Hon Peter


Gillan, Cheryl
Lloyd, Rt Hon Sir Peter (Fareham)


Goodlad, Rt Hon Alastair
Lord, Michael


Goodson-Wickes, Dr Charles
Luff, Peter


Gorman, Mrs Teresa
Lyell, Rt Hon Sir Nicholas


Gorst, Sir John
Lynne, Ms Liz


Grant, Sir A (SW Cambs)
MacGregor, Rt Hon John


Greenway, Harry (Ealing N)
MacKay, Andrew


Greenway, John (Ryedale)
Maclean, David


Griffiths, Peter (Portsmouth, N)
Maclennan, Robert


Grylls, Sir Michael
McLoughlin, Patrick


Gummer, Rt Hon John Selwyn
McNair-Wilson, Sir Patrick


Hague, William
Maddock, Diana


Hamilton, Rt Hon Sir Archibald
Madel, Sir David


Hamilton, Neil (Tatton)
Maitland, Lady Olga





Mans, Keith
Smith, Sir Dudley (Warwick)


Marlow, Tony
Smith, Tim (Beaconsfield)


Marshal, John (Hendon S)
Speed, Sir Keith


Marshal, Sir Michael (Arundel)
Spencer, Sir Derek


Martin, David (Portsmouth S)
Spicer, Sir James (W Dorset)


Mates, Michael
Spicer, Michael (S Worcs)


Mawhinney, Rt Hon Dr Brian
Spink, Dr Robert


Mayhew, Rt Hon Sir Patrick
Spring, Richard


Merchant, Piers
Squire, Robin (Hornchurch)


Mills, Iain
Stanley Rt Hon Sir John


Mitchell, Andrew (Gedling)
Steen, Anthony


Mitchell, Sir David (NW Hants)
Stephen, Michael


Moate, Sir Roger
Stern, Michael


Molyneaux, Rt Hon James
Stewart, Allan


Monro, Sir Hector
Streeter, Gary


Montgomery, Sir Fergus
Sumberg, David


Nelson, Anthony
Sweeney, Walter


Neubert, Sir Michael
Sykes, John


Newton, Rt Hon Tony
Tapsell, Sir Peter


Nicholls, Patrick
Taylor, Ian (Esher)


Nicholson, David (Taunton)
Taylor, John M (Solihull)


Nicholson, Emma (Devon West),
Taylor, Matthew (Truro)


Norris, Steve
Taylor, Sir Teddy (Southend, E)


Onslow, Rt Hon Sir Cranley
Temple-Morris, Peter


Ottaway, Richard
Thomason, Roy


Page, Richard
Thompson, Sir Donald (C'er V)


Paice, James
Thompson, Patrick (Norwich N)


Patnick, Sir Irvine
Thumham, Peter


Patten, Rt Hon John
Townsend, Cyril D (Bexl'yh'th)


Pattie, Rt Hon Sir Geoffrey
Tracey, Richard


Pawsey, James
Tredinnick, David


Peacock, Mrs Elizabeth
Trend, Michael


Pickles, Eric
Trimble, David


Porter, Barry (Wirral S)
Trotter, Neville


Porter, David (Waveney)
Twinn, Dr Ian


Portillo, Rt Hon Michael
Tyler, Paul


Powell, William (Corby)
Vaughan, Sir Gerard


Rathbone, Tim
Viggers, Peter


Redwood, Rt Hon John
Waldegrave, Rt Hon William


Rendel, David
Walden, George


Renton, Rt Hon Tim
Walker, Bill (N Tayside)


Richards, Rod
Wallace, James



Waller, Gary


Riddick, Graham
Ward, John


Rifkind, Rt Hon Malcolm
Wardle, Charles (Bexhill)


Robathan, Andrew
Waterson, Nigel


Roberts, Rt Hon Sir Wyn
Watts, John


Robertson, Raymond (Ab'd'n S)
Wells, Bowen


Robinson, Mark (Somerton)
Whitney, Ray


Roe, Mrs Marion (Broxbourne)
Whittingdale, John


Rowe, Andrew (Mid Kent)
Widdecombe, Ann


Rumbold, Rt Hon Dame Angela
Wiggin, Sir Jerry


Ryder, Rt Hon Richard
Willetts, David


Sackville, Tom
Wilshire, David


Sainsbury, Rt Hon Sir Timothy
Wirrterton, Mrs Ann (Congleton)


Scott, Rt Hon Sir Nicholas
Wolfson, Mark


Shaw, David (Dover)
Wood, Timothy


Shaw, Sir Giles (Pudsey)
Yeo, Tim


Shepherd, Colin (Hereford)
Young, Rt Hon Sir George


Shepherd, Richard (Aldridge)



Shersby, Michael
Tellers for the Noes:


Sims, Roger
Mr. Derek Conway and


Skeet, Sir Trevor
Dr. Liam Fox.

Question accordingly negatived.

Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 319, Noes 242.

Division No. 51]
[8.03 pm


AYES


Adams, Mrs Irene
Church, Judith


Ainger, Nick
Clapham, Michael


Ainsworth, Robert (Cov'try NE)
Clarke, Eric (Midlothian)


Allen, Graham
Clelland, David


Alton, David
Clwyd, Mrs Ann


Anderson, Donald (Swansea E)
Coffey, Ann


Anderson, Ms Janet (Ros'dale)
Cohen, Harry


Armstrong, Hilary
Connarty, Michael


Ashton, Joe
Corbett, Robin


Barnes, Harry
Corbyn, Jeremy


Barron, Kevin
Corston, Jean


Battle, John
Cousins, Jim


Bayley, Hugh
Cox, Tom


Beckett, Rt Hon Margaret
Cummings, John


Beith, Rt Hon A J
Cunliffe, Lawrence


Bell, Stuart
Cunningham, Jim (Covy SE)


Benn, Rt Hon Tony
Cunningham, Rt Hon Dr John


Bennett, Andrew F
Dalyell, Tam


Benton, Joe
Darling, Alistair


Bermingham, Gerald
Davidson, Ian


Berry, Roger
Davies, Bryan (Oldham C'tral)


Betts, Clive
Davies, Rt Hon Denzil (Llanelli)


Blair, Rt Hon Tony
Davies, Ron (Caerphilly)


Blunkett, David
Denham, John


Boateng, Paul
Dixon, Don


Boyes, Roland
Dobson, Frank


Bradley, Keith
Donohoe, Brian H


Bray, Dr Jeremy
Dowd Jim


Brown, Gordon (Dunfermline E)
Dunnachie, Jimmy


Brown, N (N'c'tle upon Tyne E)
Dunwoody, Mrs Gwyneth


Bruce, Malcolm (Gordon)
Eagle, Ms Angela


Burden, Richard
Enright, Derek


Byers, Stephen
Etherington, Bill


Caborn, Richard
Evans, John (St Helens N)


Callaghan, Jim
Fatchett Derek


Campbell, Mrs Anne (C'bridge)
Field, Frank (Birkenhead)


Campbell, Menzies (Fife NE)
Fisher, Mark


Campbell, Ronnie (Blyth V)
Flynn, Paul


Campbell-Savours, D N
Foster, Rt Hon Derek


Canavan, Dennis
Foster, Don (Bath)


Cann, Jamie
Foulkes, George


Carlile, Alexander (Montgomery)
Fraser, John


Chidgey, David
Fyfe, Maria


Chisholm, Malcolm
Galbraith, Sam





Galloway, George
Madden, Max


Gapes, Mike
Maddock, Diana


George, Bruce
Mahon, Alice


Gerrard, Neil
Mandelson, Peter


Gilbert, Rt Hon Dr John
Marshall, David (Shettleston)


Godman, Dr Norman A
Marshall, Jim (Leicester, S)


Godsiff, Roger
Martin, Michael J (Springburn)


Golding, Mrs Llin
Martlew, Eric


Gordon, Mildred
Maxton, John


Graham, Thomas
Meacher, Michael


Grant, Bernie (Tottenham)
Meale Alan


Griffiths, Nigel (Edinburgh S)
Michael, Alun


Griffiths, Win (Bridgend)
Michie, Bill (Sheffield Heeley)


Grocott, Bruce
Milburn, Alan


Gunnell, John
Miller, Andrew


Hall, Mike
Mitchell, Austin (Gt Grimsby)


Hanson, David
Moonie, Dr Lewis


Hardy, Peter
Morley, Elliot


Harman, Ms Harriet
Morris, Rt Hon Alfred (Wy'nshawe)


Harvey, Nick
Morris, Estelle (B'ham Yardley)


Hattersley, Rt Hon Roy
Morris, Rt Hon John (Aberavon)


Henderson, Doug
Mowlam, Marjorie


Heppell, John
Mudie, George


Hill, Keith (Streatham)
Mullin, Chris


Hinchliffe, David
Oakes, Rt Hon Gordon


Hodge, Margaret
O'Brien, Mike (N W'kshire)


Hoey, Kate
O'Brien, William (Normanton)


Home Robertson, John
O'Hara, Edward


Hood, Jimmy
Olner, Bill


Hoon, Geoffrey
O'Neill, Martin


Howarth, George (Knowsley North)
Orme, Rt Hon Stanley


Howells, Dr. Kim (Pontypridd)
Pearson, Ian


Hoyle, Doug
Pickthall, Colin


Hughes, Kevin (Doncaster N)
Pike, Peter L


Hughes, Robert (Aberdeen N)
Pope, Greg


Hughes, Roy (Newport E)
Powell, Ray (Ogmore)


Hutton John
Prentice, Bridget (Lew'm E)


Illsley, Eric
Prentice, Gordon (Pendle)


Ingram, Adam
Prescott, Rt Hon John


Jackson, Glenda (H'stead)
Primarolo, Dawn


Jackson, Helen (Shef'ld, H)
Purchase, Ken


Jamieson, David
Randall, Stuart


Janner, Greville
Raynsford, Nick


Johnston, Sir Russell
Reid, Dr John


Jones, Barry (Alyn and D'side)
Rendel, David


Jones, Jon Owen (Cardiff C)
Robertson, George (Hamilton)


Jones, Lynne (B'ham S O)
Robinson, Geoffrey (Co'try NW)


Jones, Martyn (Clwyd, SW)
Roche, Mrs Barbara


Jones, Nigel (Cheltenham)
Rogers, Allan


Jewell, Tessa
Rooker, Jeff


Kaufman, Rt Hon Gerald
Rooney, Terry


Keen, Alan
Ross, Ernie (Dundee W)


Kennedy, Charles (Ross,CS)
Rowlands, Ted


Kennedy, Jane (Lpool Brdgn)
Ruddock, Joan


Khabra, Piara S
Salmond, Alex


Kilfoyle, Peter
Sheerman, Barry


Lestor, Joan (Eccles)
Sheldon, Rt Hon Robert


Lewis, Terry
Shore, Rt Hon Peter


Liddell, Mrs Helen
Short, Clare


Litherland, Robert
Simpson, Alan


Lloyd, Tony (Stretford)
Skinner, Dennis


Llwyd, Elfyn
Smith, Andrew (Oxford E)


Loyden, Eddie
Smith, Llew (Blaenau Gwent)


Lynne, Ms Liz
Soley, Clive


McAllion John
Spearing, Nigel


McAvoy, Thomas
Spellar John


McCartney, Ian
Squire, Rachel (Dunfermline W)


Macdonald, Calum
Steinberg, Gerry


McFall John
Stevenson, George


McKelvey, William
Stott, Roger


Mackinlay, Andrew
Strang, Dr. Gavin


Maclennan, Robert
Straw, Jack


McMaster, Gordon
Sutcliffe, Gerry


McNamara, Kevin
Taylor, Mrs Ann (Dewsbury)


MacShane, Denis
Taylor, Matthew (Truro)


McWilliam, John
Thompson, Jack (Wansbeck)






Timms, Stephen
Wigley, Dafydd


Tipping, Paddy
Williams, Rt Hon Alan (Sw'n W)


Turner, Dennis
Williams, Alan W (Carmarthen)


Tyler, Paul
Wilson, Brian


Vaz, Keith
Winnick, David


Walker, Rt Hon Sir Harold
Wise, Audrey



Worthington, Tony


Wallace, James
Wray, Jimmy


Walley, Joan
Wright, Dr Tony


Wardell, Gareth (Gower)
Young, David (Balton SE)


Wareing, Robert N



Watson, Mike
Tellers for the Ayes:


Welsh, Andrew
Mr. Archy Kirkwood and


Wicks, Malcolm
Mr. Simon Hughes.


NOES


Ainsworth, Peter (East Surrey)
Coombs, Simon (Swindon)


Aitken, Rt Hon Jonathan
Cope, Rt Hon Sir John


Alexander, Richard
Couchman, James


Alison, Rt Hon Michael (Selby)
Cran, James


Allason, Rupert (Torbay)
Currie, Mrs Edwina (S D'by'ire)


Amess, David
Curry, David (Skipton  Ripon)


Arbuthnot, James
Davis, David (Boothferry)


Arnold, Jacques (Gravesham)
Day, Stephen


Arnold, Sir Thomas (Hazel Grv)
Deva, Nirj Joseph


Ashby, David
Devlin, Tim


Atkins, Robert
Dicks, Terry


Atkinson, Peter (Hexham)
Dorrell, Rt Hon Stephen


Baker, Rt Hon Kenneth (Mole Valley)
Douglas-Hamilton, Lord James



Dover, Den


Baker, Nicholas (Dorset North)
Duncan, Alan


Baldry, Tony
Duncan Smith, Iain


Banks, Matthew (Southport)
Dunn, Bob


Banks, Robert (Harrogate)
Durant, Sir Anthony


Bates, Michael
Dykes, Hugh


Batiste, Spencer
Eggar, Rt Hon Tim


Bellingham, Henry
Elletson, Harold


Bendall, Vivian
Emery, Rt Hon Sir Peter


Beresford, Sir Paul
Evans, David (Welwyn Hatfield)


Biffen, Rt Hon John
Evans, Jonathan (Brecon)


Body, Sir Richard
Evans, Nigel (Ribble Valley)


Bonsor, Sir Nicholas
Evans, Roger (Monmouth)


Booth, Hartley
Evennett, David


Boswell, Tim
Faber, David


Bottomley, Peter (Eltham)
Fabricant, Michael


Bottomley, Rt Hon Virginia
Fenner, Dame Peggy


Bowis, John
Field, Barry (Isle of Wight)


Boyson, Rt Hon Sir Rhodes
Forman, Nigel


Brandreth, Gyles
Forth, Eric


Brazier, Julian
Fowler, Rt Hon Sir Norman


Bright, Sir Graham
Fox, Sir Marcus (Shipley)


Brooke, Rt Hon Peter
Freeman, Rt Hon Roger


Brown, M (Brigg  Cl'thorpes)
French, Douglas


Browning, Mrs. Angela
Fry, Sir Peter


Bruce, Ian (Dorset)
Gale, Roger


Burns, Simon
Gallie, Phil


Burt, Alistair
Gardiner, Sir George


Butcher, John
Garel-Jones, Rt Hon Tristan


Butler, Peter
Garnier, Edward


Butterfill, John
Gill, Christopher


Carlisle, John (Luton North)
Gillan, Cheryl


Carlisle, Sir Kenneth (Lincoln)
Goodlad, Rt Hon Alastair


Carrington, Matthew
Goodson-Wickes, Dr Charles


Carttiss, Michael
Gorman, Mrs Teresa


Cash, William
Gorst, Sir John


Channon, Rt Hon Paul
Grant, Sir A (Cambs SW)


Churchill, Mr
Greenway, Harry (Ealing N)


Clappison, James
Greenway, John (Ryedale)


Clark, Dr Michael (Rochford)
Griffiths, Peter (Portsmouth, N)


Clarke, Rt Hon Kenneth (Ru'clif)
Grylls, Sir Michael


Clifton-Brown, Geoffrey
Gummer, Rt Hon John Selwyn


Coe, Sebastian
Hague, William


Colvin, Michael
Hamilton, Rt Hon Sir Archibald


Congdon, David
Hamilton, Neil (Tatton)


Conway, Derek
Hampson, Dr Keith


Coombs, Anthony (Wyre For'st)
Hanley, Rt Hon Jeremy





Hannam, Sir John
Moate, Sir Roger


Hargreaves, Andrew
Monro, Sir Hector


Harris, David
Montgomery, Sir Fergus


Haselhurst, Alan
Nelson, Anthony


Hawkins, Nick
Neubert, Sir Michael


Hawksley, Warren
Newton, Rt Hon Tony


Hayes, Jerry
Nicholls, Patrick


Heald, Oliver
Nicholson, David (Taunton)


Heath, Rt Hon Sir Edward
Nicholson, Emma (Devon West)


Heathcoat-Amory, David
Norris, Steve


Hendry, Charles
Onslow, Rt Hon Sir Cranley


Hicks, Robert
Ottaway, Richard


Higgins, Rt Hon Sir Terence
Page, Richard


Hill, James (Southampton Test)
Paice, James


Horam, John
Patnick, Sir Irvine


Hordern, Rt Hon Sir Peter
Patten, Rt Hon John


Howard, Rt Hon Michael
Pattie, Rt Hon Sir Geoffrey


Howarth, Alan (Strat'rd-on-A)
Pawsey, James


Howell, Sir Ralph (N Norfolk)
Peacock, Mrs Elizabeth


Hughes, Robert G (Harrow W)
Pickles, Eric


Hunt, Rt Hon David (Wirral W)
Porter, Barry (Wirral S)


Hunt, Sir John (Ravensbourne)
Porter, David (Waveney)


Hunter, Andrew
Portillo, Rt Hon Michael


Hurd, Rt Hon Douglas
Powell, William (Corby)


Jack, Michael
Rathbone, Tim


Jackson, Robert (Wantage)
Redwood, Rt Hon John


Jenkin, Bernard
Renton, Rt Hon Tim


Jessel, Toby
Richards, Rod


Johnson Smith, Sir Geoffrey
Riddick, Graham


Jones, Gwilym (Cardiff N)
Rifkind, Rt Hon Malcolm


Jones, Robert B (W Hertfdshr)
Robathan, Andrew


Jopling, Rt Hon Michael
Roberts, Rt Hon Sir Wyn


Kellett-Bowman, Dame Elaine
Robertson, Raymond (Ab'd'n S)


Key, Robert
Robinson, Mark (Somerton)


Kilfedder, Sir James
Roe, Mrs Marion (Broxbourne)


King, Rt Hon Tom
Rowe, Andrew (Mid Kent)


Kirkhope, Timothy
Rumbold, Rt Hon Dame Angela


Knapman, Roger
Ryder, Rt Hon Richard


Knight, Mrs Angela (Erewash)
Sackville, Tom


Knight, Greg (Derby N)
Sainsbury, Rt Hon Sir Timothy


Knight, Dame Jill (Bir'm E'st'n)
Scott, Rt Hon Sir Nicholas


Knox, Sir David
Shaw, David (Dover)


Kynoch, George (Kincardine)
Shaw, Sir Giles (Pudsey)


Lait, Mrs Jacqui
Shepherd, Colin (Hereford)


Lamont, Rt Hon Norman
Shepherd, Richard (Aldridge)


Lang, Rt Hon Ian
Shersby, Michael


Lawrence, Sir Ivan
Sims, Roger


Legg, Barry
Skeet, Sir Trevor


Leigh, Edward
Smith, Sir Dudley (Warwick)


Lennox-Boyd, Sir Mark
Smith, Tim (Beaconsfield)


Lester, Jim (Broxtowe)
Speed, Sir Keith


Lidington, David
Spencer, Sir Derek


Lightbown, David
Spicer, Sir James (W Dorset)


Lilley, Rt Hon Peter
Spicer, Michael (S Worcs)


Lloyd, Rt Hon Sir Peter (Fareham)
Spink, Dr Robert


Lord, Michael
Spring, Richard


Luff, Peter
Squire, Robin (Hornchurch)


Lyell, Rt Hon Sir Nicholas
Stanley, Rt Hon Sir John


MacGregor, Rt Hon John
Steen, Anthony


MacKay, Andrew
Stephen, Michael


Maclean, David
Stern, Michael


McLoughlin, Patrick
Stewart, Allan


McNair-Wilson, Sir Patrick
Streeter, Gary


Madel, Sir David
Sumberg, David


Maitland, Lady Olga
Sweeney, Walter


Mans, Keith
Sykes, John


Marlow, Tony
Tapsell, Sir Peter


Marshall, John (Hendon S)
Taylor, Ian (Esher)


Marshall, Sir Michael (Arundel)
Taylor, John M (Solihull)


Martin, David (Portsmouth S)
Taylor, Sir Teddy (Southend, E)


Mawhinney, Rt Hon Dr Brian
Temple-Morris, Peter


Mayhew, Rt Hon Sir Patrick
Thomason, Roy


Merchant Piers
Thompson, Sir Donald (C'er V)


Mills, Iain
Thompson, Patrick (Norwich N)


Mitchell, Andrew (Gedling)
Thurnham, Peter


Mitchell, Sir David (NW Hants)
Townsend, Cyril D (Bexl'yh'th)






Tracey, Richard
Wells, Bowen


Tredinnick, David
Whitney, Ray


Trend, Michael
Whittingdale, John


Trotter, Neville
Widdeoombe, Ann


Twinn, Dr Ian
Wiggin, Sir Jerry


Vaughan, Sir Gerard
Willetts, David


Viggers, Peter
Wilshire, David


Waldegrave, Rt Hon William
Winterton, Mrs Ann (Congleton)


Walden, George
Wolfson, Mark



Wood, Timothy


Walker, Bill (N Tayside)
Yeo, Tim


Waller, Gary
Young, Rt Hon Sir George


Ward, John



Wardle, Charles (Bexhill)
Tellers for the Noes:


Waterson, Nigel
Mr. Sydney Chapman and


Watts, John
Dr. Liam Fox.

Question accordingly agreed to.
Clause 64 ordered to stand part of the Bill.

Schedule 14

VENTURE CAPITAL TRUSTS: MEANING OF "QUALIFYING HOLDINGS"

Amendment proposed: No. 11, in schedule 14, page 257, line 32, at end insert—
'(6) The value of the interests in land held—
(a) by the relevant company or qualifying subsidiary of that company;
or
(b) (where lower) the adjusted value of the interests in land which were held by the relevant company or any qualifying subsidiary of that company immediately following the issue of the relevant holding
must not exceed half the value of the company's assets as a whole.
(7) The provisions of section 294(2) to 294(7) of the Taxes Act 1988 shall apply for the purposes of determining the value of the interests in land held by a relevant company or a qualifying subsidiary of that company. The provisions of section 295 of the Taxes Act 1988 shall apply for the purpose of sub-paragraph (6)(b) as they apply for the purposes of section 294(1)(b) of the Taxes Act 1988 to adjust the value of interest in land held immediately after the issue of a relevant holding.'—[Mr. Malcolm Bruce.]

Question put, That the amendment be made: —
The Committee divided: Aves 263, Noes 298.

Question accordingly negatived.
Schedule 14 agreed to.

Clause 91

RETURNS AND SELF-ASSESSMENTS

Ms Hilary Armstrong: I beg to move amendment No. 31, in page 107, line 2, at end add—
`(9) Her Majesty's Government shall, before 31st January 1996, present a report to Parliament on:

(a) the guidance and explanatory material made and to be made available to the public for the purpose of ensuring that returns and partnership statements under self-assessment reflect the taxable position after claims to relief and allowances and after taking into account tax suffered on, and tax credits with, the items in the return,
(b) the training provided and to be provided to Inland Revenue and other relevant staff on the provision of advice and support to taxpayers in the completion of their returns for the purpose of ensuring that returns and partnership statements under self-assessment reflect the taxable position after claims to relief and allowances and after taking into account tax suffered on, and tax credits with, the items in the return, and
(c) amendments made and to be made to the Taxpayer's Charter relating to ensuring that for the purpose of ensuring that returns and partnership statements under self-assessment reflect the taxable position after claims to relief and allowances and after taking into account tax suffered on, and tax credits with, the items in the return.'.

I know that the Chair examined the amendment carefully before selecting it and was not able to select the other amendments tabled in my name and those of my hon. Friends, because the clause was drawn up exceptionally tightly and carefully by parliamentary draftspeople who were anxious to ensure that we could not amend the text to any great extent.
The clause seeks to tighten up provisions that were made last year. I might say that anyone who is riot an accountant would have great difficulty understanding what on earth it is about, but, as I am learning, most Finance Bills are written in that way. I certainly do not aspire to be an accountant, despite the fact that my local university seems to produce more accountants than anything else.
The clause tightens up the provisions and regulations around self-assessment. It is somewhat ironic that the proposed legislation is so impenetrable, as the clause is supposed to open up the system and simplify it so that the

ordinary taxpayer will be able to fill in his or her return and assess liability. The official Opposition are happy to agree with the Government that the procedure should be simplified. The rules need to be written in such a way that proposed legislation does not become a tax avoidance charter.
I took the opportunity to read the deliberations of last year's Committee, because the clause builds on what was in last year's Finance Bill and, indeed, the Finance Bill before that. I was quite amused by them and know that the Committee will miss the presence of my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown), who was always able to bring a light touch to those matters. I apologise to the Committee, but I know that I shall not have quite that lightness of touch. I was never as good at jokes as my hon. Friend, but nevertheless will plod my way through.
This is a radical provision. It is a radical approach to the taxation system and the assessment of liability. The House has already had the painful experience of legislation insufficiently scrutinised, over-bureaucratic and insensitively implemented. Such recent legislation has not always emanated from the Treasury. Examples were given in the previous debate when the business expansion scheme was mentioned.
Talk of legislation which is over-bureaucratic and insensitive and which has led the Government into all sorts of difficulties brings to mind the Child Support Agency. This measure is not in the same league because it does not set up a new department. However, we fear that its implementation will be bureaucratic and, instead of it simplifying matters and easing the way for the taxpayer, it will present the taxpayer with a difficult passage. The complexity and denseness of the clause must give rise to concern. Those who seek to move to self-assessment in the first instance will have many problems.
Most of the amendments tabled by the Opposition were not in order because, as I said, the clause has been crafted so carefully. They sought to push the Government into considering whether they had taken appropriate and cautious steps in arriving at this radical change in the manner of clarifying tax liability.
Since last year's Finance Bill, the taxpayers charter has been published. It says:
You"—
the taxpayer—
are entitled to expect the Inland Revenue …
To help you
To get your tax affairs right
To understand your rights and obligations
By providing clear leaflets and forms
By giving you information and assistance at our enquiry offices
By being courteous at all times".
The Inland Revenue's attitude towards the taxpayer must undergo a radical shift. Instead of its current probing, challenging approach, it will have to be helpful, supportive and encouraging. It will have to develop a relationship of trust and that will be critical in ensuring the success of the venture.
The taxpayer's attitude, too, must undergo a radical shift. The legislation applies to the 8 million people who currently fill in a tax form, not all taxpayers. It requires


from them co-operation and keenness. They should want and be able to find their way through the complex provisions.
Most people I know fill in their tax forms with some apprehension. They wonder where it will land them and whether they have got it right. Not everyone shares my father's approach to taxation. He tells me that he would tell his accountant that he did not want to avoid paying tax and that he wanted to pay all that he was liable to. It was clear from our previous debate that that is not the attitude of all taxpayers when it comes to filling in their tax forms. I suspect that my father's attitude has something to do with his Methodist upbringing. We are entering a regime where the relationship between the taxpayer and the tax inspector will have to change.
The Government made it clear last year that there would have to be a change in the number of tax inspectors. That goes without saying. There was some debate in Committee last year about what would happen to the approximately 3,000 tax inspectors who are expected to have to move. At that stage the Minister could not clarify whether they would be redeployed or whether the Government would take the opportunity to reduce costs by reducing the number of people employed.
We are anxious that the Government should consider the matter carefully. Given the changing relationship between taxpayers and tax inspectors, the Opposition contend that those tax inspectors should be redeployed within the Inland Revenue in order, specifically, to help, advise and support the taxpayer, particularly in the early stages of moving to self-assessment, with the change in the base year on which the tax form is to be completed.
We are not content that there has been sufficient retraining or opportunity for the relevant staff to be able to provide comprehensive advice and support to assist taxpayers in the completion of their tax returns. The Inland Revenue staff association is not content that sufficient effort has been put into the retraining of staff. It shares our anxieties that the scheme could falter because insufficient attention has been paid to matters of detail and the specific area of retraining for the tax officials to fulfil their new role. One of the major criticisms of the Child Support Agency was that the staff were not prepared for or effectively trained to face the new challenges presented by the legislation. It would be a travesty if, because of that, the Government faltered into a new way of assessing tax liability.
8.30 pm
Self-assessment will not be introduced for a couple of years. The year of its implementation is likely to be a general election year, and the offical Opposition are therefore particularly anxious to ensure that all the necessary steps are taken to prevent taxpayers from feeling that they have been led up the garden path, and from becoming, as it were, the equivalent of the CSA protesters. We do not want good self-employed small business people to be driven to such lengths. I hope that that is an exaggeration, but I also hope that the Government are learning some of the lessons of inappropriate and insufficient preparation for major changes. I hope that they are beginning to realise that we Members of Parliament must ensure that all the necessary preparations are made—and, as I have said, the role of Inland Revenue staff will be crucial in that regard.
So far, taxpayers have not been given any preparatory information and advice. Consultation papers have been issued this year, and Treasury press releases have suggested that changes in the Finance Bill would deal with the matter, but I am not satisfied—and nor are several outside bodies—that that is the case.
We tabled a number of probing amendments—which, because of the tight drafting of clause 91, were not in order—in an attempt to give taxpayers more leeway in the first year of self-assessment. We wanted not to encourage tax avoidance, but to minimise the problems: problems in the early stages of the implementation of the clause would undermine the principle of self-assessment and the Government's objectives, which we fully support.
When the consultation papers were issued, the Institute of Taxation wrote to the Treasury expressing a fear that the cost to employers would rise significantly. The institute felt that the Government had not taken sufficient account of that. I spoke to the institute this week, and it remains exceedingly sceptical, feeling that the Bill does not tackle the points that it raised during consultation.
Following the issue of the documents, the institute wrote—and it stands by that view:
The Revenue must devote sufficient resources to educating employers and employees about the impending changes. They must also simplify the taxation of benefits and expenses and bring national insurance contributions into line with other taxes … If assessment may benefit a very small minority of employed taxpayers but the most obvious result of the proposals will be a significant increase in compliance costs for employers.
This arises not only in providing the annual information that employees generally will need … but also because employers will find themselves supporting the Inland Revenue's efforts to make employees more tax aware. Increasing taxpayer awareness on this scale involves a change in culture and attitude that may well take a generation to achieve. In the meantime the employer is inevitably likely to bear the brunt of employee difficulties and indeed we believe that self assessment for employees cannot be made to work by the Inland Revenue without the active co-operation of very many employers.
If that is the case, we have a long way to go before the Government's aims are achieved. Over the past two years they have consistently reiterated their anxiety to remove burdens from employers, but the Institute of Taxation foresees an additional burden.
As I have said, we welcome the principles of self-assessment and simplification of the tax system, but no one who reads this year's Finance Bill will be convinced that the system is indeed being simplified. Indeed—as we shall point out later in Committee—in some ways it is being made more complex. We must be confident that legislation passed by the House will be implemented in a way that achieves the House's aims, but the Opposition remain unconvinced that the Government are serious enough about that.
We want to be sure that the taxpayers charter takes account of these important changes in the assessment of tax liability. I am cynical enough never to expect the Government to accept an amendment in full, but I am always open to persuasion, and I hope that they will accept at least the spirit of this one. We want to ensure that the House can implement the self-assessment proposals with confidence: that is the only way in which we can be certain that the changes work in the interests of taxpayers and, indeed, the taxation system as a whole.

Mr. Alan Milburn: As my hon. Friend the Member for Durham, North-West (Ms Armstrong)


said, the introduction of self-assessment is a radical shake up in the tax system. The Opposition do not argue against the principle of self-assessment but we are concerned about its implementation. On the plus side it is fairly clear that it will mean less bureaucracy, less paperwork and fewer Revenue overheads. But it will be a culture shock for taxpayers. For the first time the onus will be on them to supply the correct information and submit a return within the required time. Obviously, automatic penalties will be imposed on those who fail to get their tax return in on time.
I hope that a new impetus will be given to tackling some of the problems that have become evident in recent years. I mention in particular the alarming statistic that at the moment about 2.5 million taxpayers file their tax returns late. That has a cost to the Exchequer and to the taxpayer. Has the Treasury assessed the impact of those appalling late filing figures? How many people does the Minister expect to file on time and how many does he expect to file late? What assessment has the Treasury made of the financial implications of those figures? Has the Minister assessed the cash-flow implications for the Exchequer? At the end of the day that means the taxpayer because, as Conservative Members continually remind us, it is the taxpayer who foots the bill.
I hope that the Treasury has paid close attention to the Public Accounts Committee report. Our fourth report entitled, "Inland Revenue: Getting Tax Right First Time and Dealing with More Complex Postal Queries" raised a number of concerns about current practice and raised some doubts about the implementation of the self-assessment system. If the onus is placed on the taxpayer and Parliament is broadly in agreement with that principle, the onus is on Parliament and especially on Ministers to make taxpayers fully aware of their self-assessment responsibilities.
What thought has been given to the sort of public education programme that will be necessary not just for taxpayers but for employers and Inland Revenue staff? My hon. Friend the Member for Durham, North-West spoke about the need to ensure that adequate training mechanisms are in place not when the system is introduced but before its introduction, so that teething problems are minimised.
The next issue that I wish to raise was highlighted in paragraph 18 of the PAC report:
The success of self-assessment will depend in part on the use of forms that taxpayers can readily understand. The Department accepted that such forms are a critical piece of documentation for the new system.
I understand that some preliminary forms have been trialed, but I also understand that the Plain English Society has not yet been consulted about the wording of the forms. That might seem trivial but according to rumour the Treasury has in mind forms that run not to one or two pages but to 17 pages. I hope that the Minister will take the opportunity to dispel that rumour because if I were a small self-employed business man dealing with the plethora of problems that such business men have to deal with the last thing that I would want to face would be more red tape, bureaucracy and paperwork by way of 17-page forms from the Inland Revenue.
The most important point about implementation is contained in the PAC report. It noted the complexity of tax legislation and the problems that that causes for taxpayers and Inland Revenue staff. The Committee recommended that the Treasury should continue to take every opportunity to simplify the tax system.
8.45 pm
As my hon. Friend the Member for Durham, North-West said, the Finance Bill contains 348 pages. Whatever else it has going for it, it certainly does not simplify the tax system. Some complicated rules will need to be made clear to all taxpayers. What does the Minister have in mind for simplifying the tax system? Unless the system is made straightforward and clear, self-assessment will not be a boon for individual taxpayers and certainly not for Inland Revenue staff.
However, it will be a boon for the private accountancy industry. There will be privatisation of the tax system because taxpayers and small businesses which rely upon the Inland Revenue properly to assess their affairs will have to turn to private accountancy firms and pay for the privilege.
That brings me to the important matter of what is to happen to the 3,000 Inland Revenue staff who could be displaced as a result of self-assessment. Self-assessment is a threat to those staff but it is also an opportunity because it will provide a chance to redeploy staff so that back room officers will be transferred to the front line and district officers will be turned into more public-friendly people. Advice shops could be opened in district offices. Has the Treasury any plans on that?
As I understand it, self-assessment will give Inland Revenue staff an opportunity to monitor taxpayers' returns. How many of those self-assessment forms will simply be nodded through and how many will not be properly assessed or queried? We need an assurance that a thorough-going monitoring process will apply to as many return forms as possible. If implementation goes wrong, self-assessment will turn into a tax avoidance industry. The last thing that Ministers want to do is to give the green light to tax avoidance, especially when we hear from the Inland Revenue that the current system means that annually £100 million worth of tax is not properly collected from taxpayers.
Some concerns exist therefore. I hope that the Minister will be able to deal with them in his reply to the debate. We had a debate on self-assessment in the Committee that considered the Finance Bill last year, and this Finance Bill takes the issue a stage further. Hon. Members on both sides of the House agree that it is a positive step forward. We all agree about the need to reduce unnecessary bureaucracy, but dangers exist in the process of implementation. My hon. Friend the Member for Durham, North-West has pointed out some of those dangers. I hope that I have as well. I would be grateful if the Minister would deal with the concerns that have been expressed.

Sir George Young: I very much welcome this opportunity to reassure the House that the Government take self-assessment reform seriously. We have taken and are taking on board the words of caution that have been voiced in the debate. I hope that, in the few minutes that I propose to take to deal with these issues, I shall be able to reassure hon. Members on the specific points that they have raised.
Like the hon. Member for Durham, North-West (Ms Armstrong) I am not an accountant. Like her, I experienced a culture shock when confronted with the legislative text in the Finance Bill. Like her, I am climbing a fairly steep learning curve. She asked if the Government were taking appropriate cautious steps to introduce the measure. She is right so to do. Self-assessment is a major change to the personal tax system. We are introducing it after an extensive period of consultation, both public and with representatives of business and the professions, and it has already been debated at some length in the House.
The hon. Lady outlined qualities that Inland Revenue staff will need if this is to be a success. I am confident that they have those qualities already and that they will apply them to the challenge that lies ahead.
The Government are committed to the new system, which has been widely welcomed. I was pleased that, in the debate, the principle of self-assessment has been broadly accepted. When we debated the matter in 1994, the hon. Member for Newcastle upon Tyne, East (Mr. Brown) graciously acknowledged that broad agreement existed on the issues, and that they were not controversial.
A few days ago, I happened to meet Inland Revenue staff from Darlington when they were in London. They were finalists in a competition organised by the Revenue to promote details of schemes worked up by staff which especially emphasised customer service. The hon. Member for Darlington (Mr. Milburn) can be proud, therefore, of the Revenue staff in his constituency in that they reached the final of the competition.
Both he and the hon. Member for Durham, North-West complained about the length of the legislation. If one wants to simplify the tax system, one may have to legislate. Some of the reforms in the Bill simplify the system. Personal incidental expenses are an example. The length of the Bill, therefore, does not necessarily mean that the legislation is becoming more complicated. I hope that it contains proposals that simplify the system.
The main legislation for self-assessment was passed in the Finance Act 1994 with all-party support. Some of the changes have already come into effect, or will do so soon. As my right hon. Friend the Secretary of State for National Heritage made clear last year, some of the more detailed clauses would need longer to complete and would be introduced this year. He also committed the Government to making changes where, on further examination and consultation, it was felt sensible to do so. That remains the case.
The Bill contains a considerable number of clauses that have as their origin the desirability of making changes to make self-assessment easier—something that was advocated by both Labour Members who have spoken. The Government have, wherever possible, taken the opportunity to simplify the underlying rules at the same time. For example, the Bill contains measures that will introduce substantial simplifications for the taxation of income from property, and the beneficiaries of the estates of deceased persons. In developing measures for self-assessment, I am determined that they should be as straightforward as possible.
It is perhaps worth reminding the Committee about the main features of self-assessment. It is a clearer, more streamlined system for taxpayers. Self-assessment will also simplify matters for the Revenue. It will free up

resources. In response to the hon. Member for Darlington, some of those will be devoted to improving customer service, as well as the Revenue's compliance work.
The introduction last year of the current-year basis for businesses has paved the way for taxing all income and gains in one sum and with common dates. It will no longer be necessary for the Revenue to make estimates of an individual's tax liability as a matter of course, leading to the familiar but costly rigmarole of sorting out, often over a long period, how much tax should be paid. Instead, taxpayers will be able to put all their income, gains, deductions and allowances for one year on the one tax return, and send it to the Revenue within a clear and realistic timetable.
The hon. Member for Darlington asked about the timetable. The returns will have to be in 10 months after the end of the tax year, as against the current position—in theory, the limit is 30 days. Ten months is a generous time, particularly if one compares it with the time that is allowed in other European countries.
Taxpayers will have the opportunity to work out their own tax if they wish, but, as I made clear on Second Reading, they do not need to do so. The Revenue will do it for them if that is what they choose.
Hon. Members will know that self-assessment will apply directly only to people who receive tax returns. They number 9 million people and are the self-employed and others with relatively complicated tax affairs, such as directors and higher-paid employees. Pay-as-you-earn will continue to operate as now for all employees, of whom four out of five, some 20 million people, do not receive returns and will notice little change. I say to the hon. Member for Durham, North-West that of course the Government will learn from experience as they introduce the new reform.
It is important that such a fundamental change should be made only after careful thought and extensive consultation. We have recognised that throughout and, to allow more time, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) decided, when announcing the go-ahead in 1993, to put back the start date by one year. The emphasis now must be on doing all that we can to make the new system work well from the start.
To help achieve that, the Revenue has already begun an extensive programme of research and education. It is preparing a publicity campaign to start later this year. It is consulting widely on the design of the tax return, which the hon. Member for Darlington mentioned, as well as on many other aspects of self-assessment. It will test its plans for the new system in a live trial—a pilot, if you like, Madam Deputy Speaker—starting this April. That will involve some 5,000 volunteers and their advisers and employers. It will be based at the Revenue's "model office" in Leicester.
That is not a theoretical exercise. It is real Revenue staff dealing with real taxpayers. The trial and the lessons that are learned from it will help the Revenue to ensure that the introduction of self-assessment goes as smoothly as possible. In response to both Labour Members who have spoken, the Revenue has also started an extensive training programme for its own staff to ensure that they are properly prepared for the new system.
The key aim of self-assessment is to reduce the overall costs of running the tax system. A more straightforward system will deliver that, and will provide significant savings for the self-employed by sweeping away all the complexity of the old rules. That will allow businesses to concentrate their energies where they really belong—on creating wealth.
As with any new system, people in business and others who receive returns and their advisers will need to learn new rules. I recognise that there will be some initial costs for those affected. Some employees will need more information than they do now about benefits in kind and expenses payments, so that they can complete a tax return if they receive one. That will also mean more work for some employers—those who do not provide that information to their employees, but who will need to do so.
We have tried to keep business costs to the absolute minimum by consulting as widely as possible on the best way forward, listening carefully to what people had to say. We are continuing with those consultations. Indeed, members of the self-assessment consultative committee were good enough to come to a meeting at the Treasury just before Christmas, so that I could hear their views at first hand. A substantial programme of publicity and education for taxpayers is planned and is under way. Particular emphasis will be given to raising awareness and to tax advisers understanding the changes through mailings and presentations.
Some deregulatory savings will arise from self-assessment. Both the cost and savings are documented in detail in the comprehensive compliance cost assessment that we published on Budget day. Notwithstanding such costs, the overall impact on business is expected to be positive and to produce continuing savings of between £125 million and £250 million per year in business costs. The main beneficiaries of that will be the self-employed. I can tell the hon. Member for Darlington that the aim of self-assessment is to help people to get their tax right first time. This will involve making them aware of their responsibilities through the programme of education and publicity that I mentioned.
9 pm
The design of the tax return and the guidance notes will also have an important role. We are consulting taxpayers, professional advisers and Revenue staff and we are also undertaking research to help design a return that is as easy to understand and as simple to complete as possible. The response to the consultation has been excellent, with strong interest from not only agents but the public. Indeed, more than 1,000 people volunteered to try out the new return for themselves—it says something for the popularity of the new scheme when people are volunteering to fill in a new return that they are not obliged to fill in. Consultation on the new tax return will continue throughout 1995.
The consultations centre on the traditional paper tax return but self-assessment is a system for the future and clause 136 includes the measures necessary to enable taxpayers to file their returns electronically. However, our plans do not stop at electronic lodgement. Many taxpayers already have personal computers at home and, in the

future, even more will have computer skills. Filling in a tax return, especially under self-assessment, is an activity which, I believe, lends itself naturally to the use of a personal computer—it can do the calculations and it can access the right help screen. I have, therefore, encouraged the Inland Revenue to consider urgently the possibility of producing a version of the return on computer disk, but it need not be something that the Revenue itself produces—it is a natural candidate for private sector involvement or partnership. Either way, I regard it as an exciting development and the right way forward.
Finally, whether people decide to use a paper return, a computer disk or electronic lodgement, self-assessment will be a big change and people are likely to need help of one kind or another from the Revenue. That brings me to a point made by the hon. Members for Darlington and for Durham, North-West. The Revenue will be embarking on an ambitious and comprehensive customer service programme to inform and assist taxpayers so that they can understand the new system and comply with their obligations.
The Revenue is currently conducting research into taxpayers' needs and consulting extensively on all aspects of its programme. The results of that work will help it develop the most effective and efficient service using, for example, carefully targeted written guidance on the telephone and face to face through the network of tax inquiry centres. The Revenue now has nearly 400 such inquiry centres and I have been impressed by the high standards of service that they provide. Hon. Members may have raised other issues but I shall write to them, if I may.
We shall, of course, continue to keep the House informed of developments as we move towards full implementation of self-assessment. We expect to introduce further self-assessment legislation, the third and—I hope—final tranche being in next year's Finance Bill. That will provide ample opportunity for further parliamentary discussion on the progress of self-assessment and other clauses which will be dealt with in Standing Committee.
Against that background, I hope that I have given the hon. Member for Durham, North-West sufficient assurance to persuade her not to press the amendment to a Division.

Ms Armstrong: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 91 ordered to stand part of the Bill.
To report progress and ask leave to sit again.—[Mr. Bates.]
Committee report progress: to sit again tomorrow.

CHILDREN (SCOTLAND) BILL

Ordered,
That in relation to the Children (Scotland) Bill, Standing Order No. 91 (Special Standing Committees) shall have effect with the following alterations:

(a) in line 6, leave out 'four morning sittings' and insert 'two morning and two afternoon sittings'; and
(b) in line 18, leave out 'three morning sittings' and insert 'one morning and two afternoon sittings'.—[Mr. Bates.]

Queen Elizabeth II Hospital (Welwyn Hatfield)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

Mr. David Evans: As the House knows, "Queen Elizabeth II" stands for the greatest living monarch and the world's loveliest cruise ship, but only the people of Welwyn Hatfield know that Queen Elizabeth II is also one of the country's finest hospitals. It dispenses more love and care to my constituents than probably any other hospital in the United Kingdom does to its patients. That is why it is named after a great lady and a great ship.
I am grateful for the opportunity to raise the issue of the Queen Elizabeth II hospital in Welwyn Hatfield. The QE2 is an efficient, successful and vibrant hospital. Since receiving trust status in 1991, in-patient and day case operations have increased by 28 per cent.; the average waiting time has dropped from seven months in 1989–90 to just three months in 1993–94, which is well below the national average; and, since 1991, the QE2 has introduced a number of new developments and schemes.
They were: first, the Danesbury home for the accommodation of physically handicapped people; secondly, a day surgery unit; thirdly, a magnetic resonance imaging unit which saves unnecessary journeys to central London; fourthly, new ultrasound equipment to enable the women of Welwyn Hatfield to produce bigger bouncing babies; fifthly, new computer systems to take care of patients' medical records; sixthly, delivery suite recovery rooms for the bigger bouncing babies; seventhly, the construction on level 8 of Cuffley ward for general surgery, thus freeing other facilities for medical emergencies; eighthly, the conversion of level 6 Bramfield ward for medically dependent patients; ninthly, the construction of a stroke rehabilitation unit at Queen Victoria memorial hospital to help the victims of heart attacks; tenthly, the construction of a children's out-patients facility helping mums and dads stay together; eleventhly, the construction of a post-natal mother and baby unit called Thumbswood ward; twelfthly, the installation of security closed circuit television to prevent baby snatching; thirteenthly, an assessment unit for the accident and emergency department; fourteenthly, a new orthopaedic unit to get my constituents up and running as soon as possible; and, fifteenthly, a host of minor works, repairs, improvements and new equipment. Since 1991, total expenditure has amounted to £13 million. That is £175 for every one of my constituents.
May I take this opportunity to thank all my parliamentary colleagues in Hertfordshire for their support over a long period on this issue? I would especially like to thank my hon. Friends the Members for Broxbourne (Mrs. Roe), for Hertford and Stortford (Mr. Wells) and for Stevenage (Mr. Wood). Since my hon. Friends the Members for Hertsmere (Mr. Clappison) and for Hertfordshire, North (Mr. Heald) came into the House, they have given me equally strong support. I thank them for all the effort that has gone into this hospital.
I am very proud of our national health service. It has developed and flourished under successive Conservative Governments, who have invested additional funds in real terms in the service each and every year .since 1979. Indeed, that commitment has resulted in an even greater

proportion of gross national product being directed towards health; from 4.7 per cent. in 1979—the legacy left for us by the Labour party—to 6.1 per cent. currently.
The Secretary of State has already announced a further large injection of funds for the forthcoming year. For the year 1993–94, a massive £37,000 million has been invested to provide a comprehensive and efficient health service, which is still the envy of the world and which is available to every man, woman and child in Britain, irrespective of age, race, colour or creed.
Why is it the envy of the world? Why do health professionals visits from Europe and America to find out how we provide such good value for money in health care? The answer is simple—because of the health service reforms introduced by this Government in 1991. As a result of those reforms, the country now benefits from more health facilities and ever-increasing quality. But that cannot be taken for granted—nor would it continue under a Labour Government. Let us, to set the background, take the lot opposite for a trip down memory lane and remind them exactly what happened under the last Labour Government.
First, in 1977–78, the health budget was cut by 3 per cent. in real terms. Secondly, the capital spending was cut by one third in real terms; the largest ever cut inflicted on the NHS capital programme in the entire history of the national health service. Aneurin Bevan, eat your heart out. Thirdly, between 1974 and 1979, in real terms, nurses' pay fell by 21 per cent., doctors' pay by 16 per cent. and surgeons' pay by 25 per cent.
Fourthly, in 1978–79, the NHS went on strike, led by the Confederation of Health Service Employees and the National Union of Public Employees. Telephonists were on strike and clinical staff were manning public call boxes to get calls into the hospital. Clean linen was not allowed through picket lines. Foul linen was destroyed, because the unions would not let it out of the hospital. Meals were provided by volunteers and cleaning of the hospitals was virtually non-existent. Drugs and medicines were not allowed in. Cancer parents were refused treatment and left on the pavements. Hospitals were brought to their knees and the QE2, under Labour, was shut down.
During the winter of discontent, Barbara Castle, the former Labour Secretary of State for Health and Social Services, described her attack on pay beds as an "essential political sweetener" for the trade unions. Let no one forget that the Labour party has 156 Members who are sponsored by unions, including the whole of their Front-Bench team. As we all know, balding Bambi is sponsored by the Transport and General Workers Union.
We will not be fooled by their £500 suits or their £60 hairdos. They are still committed to tossing political sweeteners to unions and, in return, the unions toss financial sweeteners to the Labour party. As the leader of the TGWU said last year, "No say, no pay." One has to ask oneself what sort of health service we would have under the direction of the right hon. Member for Kingston upon Hull, East (Mr. Prescott), who cannot even remember where he parked his car.
Labour's political interference in the Government's health reforms could be identified back in 1990, when the poisoned dwarf, the hon. Member for Livingston (Mr. Cook), who at the time was the Labour spokesman for health, threatened NHS managers working on implementing the Government's health reforms. In a


blatant threat, the hon. Member for Livingston told them to go slow on the Government's health reforms, because they would all be reversed by the next Labour Government.
The Health Service Journal condemned the outrageous interference of the hon. Member for Livingston when it stated:
The threat was barely veiled: Everyone judged to have appeared too enthusiastic about the White Paper need not expect to have their contract renewed by a Labour Health Secretary.
The journal went on to describe the hon. Gentleman's actions as
outrageous interference in NHS management and flagrant intimidation of NHS managers.
So much for democracy.
Now let us consider what has been achieved by the Government, and the implications of that for the QE2. Between 1979 and 1992 the number of nurses and midwives increased by nearly 25,000, and the number of medical and dental staff by nearly 10,000. Nurses' pay has risen by not less than 53 per cent., and doctors' pay by 35 per cent, since 1979.
Since the reforms were introduced in 1991, the number of patients treated in hospital has increased by 5 per cent. a year, compared with an increase of 2.4 per cent. a year between 1979 and 1991. The rate of increase during the latter part of the 1970s—the last period of Labour so-called Government—was a paltry 1 per cent. Of course, under Labour the number of shop stewards in the health service increased even faster than the number of top-class doctors leaving the country. Denis Healey made the pips squeak all right, and under Barbara Castle they were left squeaking.
The number of patients treated in hospitals has increased from 7 million in 1991–92 to 8 million in 1993–94—a truly remarkable achievement. Waiting times have fallen, as have the numbers waiting. Half of all patients are seen immediately and 30 per cent. of the rest are seen within 2 weeks; 75 per cent. of patients are seen within three months, and 98 per cent. within the year.
The reforms have changed the system from a provider-led to a purchaser-led service. Under Conservative leadership, there has been a substantial programme of hospital modernisation and building. More than 800 hospital building schemes, each worth more than £1 million, have been completed since 1980, and almost another 300 are in the pipeline.
The purchaser now calls the tune, identifying need and responding to the requirements of the local population, setting contracts to ensure that hospitals and community units know what services and how many services will be required of them, so that they can plan their delivery with optimum staff numbers and the right number of beds.
Gone is the boom-bust mentality that characterised the provision of care before the reforms—hospitals working flat out with all their beds open for the first two thirds of each year, and then coping with bed closures because the money had run out, resulting in the indiscriminate cancellation of urgent as well as routine operations. Yes, I am proud to be associated with a Government who have had the vision and courage to introduce such fundamental

changes, and who have ensured that care has improved so much. Until the reforms, most hospital calendars ran for only nine months of the year.
However, there is a problem. That success depends on the highest quality of purchasing if services are to be provided in the best possible way. My constituency has suffered because purchasers published an ill-conceived, badly researched and poorly written document. It is called "Where do we want to be?"—God knows, but not where they suggest. That so-called strategic discussion document was released because the purchasers wanted to tell the public that all their services had to be reviewed and that the number of accident and emergency departments in Hertfordshire might be reduced from four to two.
The proposal, which was based on badly researched data, has caused enormous anger and resulted in great anxiety for the population of Hertfordshire, not least our proud independent senior citizens, who want to be loved and cared for as they reach old age, not to have some upstart terrify them with an awful ill-conceived document.
Why has there been so much trouble? First, because we love our hospital and, secondly, because that document implied, although it did not state it, that our local hospital, the Queen Elizabeth II hospital of Welwyn Garden City, was the prime candidate for reduction of accident arid emergency services and for subsequent complete closure.
Such a proposal, albeit for discussion, is a disgrace, because our hospital has provided a model for demonstrating the success of the reforms. During the 1980s, it was not successful. Morale was low. There were financial difficulties. Delays for treatment were considerable.
In those days, we were starved of cash, not by the Government, but by Sir William Doughty. I have to tell you, Madam Deputy Speaker, that he did not receive his knighthood for a contribution to the health service—that would be too much of a joke. In his role as chairman of North West Thames regional health authority, he enabled the more favoured inner-London parts of the region to be overfunded. For every £1 spent on health care for someone in Brent, only 75p was spent on care for someone living in Welwyn Hatfield.
Back in 1989, the North West Thames regional health authority used a formula designed by Mr. Doughty for allocating the money provided by Government, which resulted in 11 districts being overfunded and two underfunded. East Hertfordshire was underfunded by £400,000.
It was unacceptable to watch the budget for East Hertfordshire district continually cut to subsidise financial disasters such as the construction of the Chelsea and Westminster hospital, which, let me tell you, Madam Deputy Speaker, was originally estimated to cost £70 million. It did not cost £70 million; it did not cost £80 million; it did not cost £90 million, or £100 million, or £110 million, or £120 million, or £130 million, or £140 million, or £150 million, or £160 million, or £170 million, or £180 million, or £190 million, or £200 million, or £210 million, or £220 million, or £230 million. It cost £245 million.
Every capital project in our region was suspended for five years to accommodate Sir William Doughty and his bloody silly hospital.

Mr. Vivian Bendall: rose—

Madam Deputy Speaker (Dame Janet Fookes): Order. I know that the hon. Gentleman feels strongly, but I do deprecate some of his language, and I would ask him to moderate it.

Mr. Bendall: So my hon. Friend would agree with me that inner London has been doing very well at the expense not only of his area but also of peripheral London?

Mr. Evans: My hon. Friend makes his own argument very well. It is a disturbing fact, and we are seriously worried about it.
However, when East Hertfordshire obtained trust status, it changed entirely. It became an acknowledged success, recognised as such by my right hon. Friend the Member for Peterborough (Dr. Mawhinney) when he visited my constituency in his capacity as the Minister of State for Health. Waiting times have declined. Contracts for services were all met and the trust has finished its financial years either in balance or in surplus.
During the 1980s, I used to hear lots of complaints about the way that services were provided.
Now, the population is proud of its hospital and the high quality of care that it provides. Its accident and emergency department, which was threatened by the purchasing agency, is the biggest in the county of Hertfordshire. It is the most central, the newest and the only department that already meets the patients charter standards for out-patients.
According to the purchaser's own publication, it is the cheapest department per patient in Hertfordshire. It is the only accident and emergency unit where patient numbers are increasing. It is forecast that, within five years, it will be one third larger than the next largest department in the county. It has the lowest management costs in the region. It serves a catchment population of 500,000 people, all of whom live within 20 minutes travelling time, which means that it is pivotal as an emergency hospital service in the county of Hertfordshire.
The residents of east Hertfordshire have lost access over the past 10 years to accident and emergency services at the Hertfordshire and Essex hospital, Hertford county hospital and St. Albans city hospital. Part of the argument to support the closures of those units was the existence of the accident and emergency unit at the Queen Elizabeth II hospital which has, as a result, grown from one of the smallest units, to overtake all others and become the biggest unit. It will treat more than 50,000 new patients this year.
Why should that success story be overshadowed by threats of closure? The reason is simple—bureaucrats. A few managers in the purchasing authority decide that a hospital can be closed. Despite such phenomenal success, all the principles that I have espoused will be sluiced away with the bedpans. Purchaser dogma cannot overrule popularity, people, patients and success. Surely, the thrust of the Government reforms is that successful hospitals and accident and emergency units attract more patients and so receive more funding. Funding follows the patients—at least, that was the idea until the paper-cushioned bureaucrats stuck their biro in.
Jenny Griffiths, the chief executive of the Hertfordshire health agency, who has a closet socialist background, followed her own little principles. She believes—as all socialists believe—that the funding should follow the white elephants and cause mayhem within a Conservative success story. As always, the Labour party, nationally and locally, has tried to make the matter a political one. Its claim that there is not enough money in the Queen Elizabeth II hospital is clearly a blatant lie, and shows a total lack of knowledge of trust status. In any case, the issue is about how a local purchaser behaves. The Hertfordshire health agency is for the benefit of patients and their families.
If the issue is to be party political, so be it. Let me tell the world that the Conservative party and the Government have ensured that the Queen Elizabeth II hospital has flourished. My right hon. Friend the Secretary of State for Health and the bureaucrats between her and the point of patient care need to know and understand that the hospital belongs to the people. We, the people of Welwyn Hatfield, will not allow anyone who seeks promotion by trying to be too clever by half at the expense of patients who are my constituents.
I will be vigilant, aggressive, abrasive, determined and committed to the well-being of my constituents, the hospital management, doctors, consultants, nurses, ancillary staff and the hospital itself. If anyone in the House or outside it regards that as a threat, I can tell them right now that it is—"Davie Evans is watching you. Hands off our hospital". Can the Minister say here and now that there are no plans to close any accident and emergency departments in Hertfordshire, particularly the accident and emergency department at the Queen Elizabeth hospital?

Mr. Oliver Heald: My hon. Friend the Member for Welwyn Hatfield (Mr. Evans) has done the House a service in bringing this important matter before us tonight. My constituents in north Hertfordshire use two hospitals. In the south and the west, they use the QE2 and they consider it to be as good a hospital as my hon. Friend has explained to the House. To the north and the east of my constituency, my constituents use the Lister hospital in Stevenage.
I see that my hon. Friend the Member for Stevenage (Mr. Wood) is in his place on the Treasury Bench. My hon. Friend the Member for Welwyn Hatfield said that his hospital provides excellent services and has improved its facilities in recent years, and so too has the Lister hospital, the other main hospital that my constituents use.
The hospital has a new renal unit, an improved cancer facility and improved screening facilities. There is a new entrance at the hospital and new car parking facilities. A brand new outreach clinic at Baldock costing £500,000 opened last year. The other satellite hospitals that look to the Lister—such as the Hitchin hospital and the Royston hospital—also provide excellent facilities, including local physiotherapy services.
The people of Hertfordshire and the county health service have embraced the Government's reforms. We were the first county with a major tranche of general practitioner fundholders—we led the way. We adopted trust hospitals at an early stage because we believed in them. We said that the Government's reforms would reduce waiting lists—and, by goodness, they have.
It is against that background that the disgraceful and insensitive consultation document, published in October last year, proved such a shock to everyone in Hertfordshire. It was an opaque document; people could not understand it. It seemed to suggest that accident and emergency departments at the QE2 and Lister hospitals, which are needed and valued by my constituents, might be closed. It suggested that, because of the number of admissions that would be lost to our hospitals, one of them might have to close.
The community health council was shocked. The district councils—all 10 of them—wrote to the health agency saying that it could not happen. My constituents have written to me and to the regional and national health authorities making that point clear.
When I wrote before Christmas to Sir William Staveley, the chair of the regional health authority, asking for an assurance that the accident and emergency service at Lister and services across Hertfordshire would not be interfered with or diminished, he replied that he would not prejudge the consultation. Since that time, meetings have been held in all the main towns.

Mr. Bendall: Is my hon. Friend aware that the same regional health authority controls my area in Ilford, North and Sir William Staveley is giving the same answers to our questions? I am as deeply concerned about my area as my hon. Friend is about his—and I know a lot about his area because I was a parliamentary candidate there twice in 1974.

Mr. Heald: My hon. Friend makes his point about his part of the world with his usual force.
In my constituency, the narrow country roads between the major trunk roads mean that transport between towns is difficult. Some of my constituents in the south-western villages might have to travel all the way to the Lister hospital instead of the QE2. The fear that long extra travel times would be needed if one of the accident and emergency services was closed has caused great anxiety.
It is wrong that such a document, which was not even a formal consultation document—it was described as a discussion document, among other things—should be produced. The purchasing authority should have made its intentions absolutely clear and been transparent in its actions.
I hope that the assurance for which my hon. Friend the Member for Welwyn Hatfield asked regarding the QE2 and all accident and emergency departments in Hertfordshire will be given today by my hon. Friend the Minister, as only that will set at rest the minds of my constituents and all those in the surrounding area who are concerned. I know that other Hertfordshire Members would share that view.

Mr. James Clappison: I congratulate my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) on the debate and on the powerful speech that he made. It was followed by another powerful speech by my hon. Friend the Member for Hertfordshire, North (Mr. Heald). My hon. Friends have amply demonstrated our commitment to the national health service in Hertfordshire

and I endorse unreservedly all that they said about the progress that has been made in the health service in Hertfordshire in the past 15 years.
Let me add one footnote to the long list o:1 achievements outlined by my hon. Friends. It is a great pleasure for me that, earlier this month, a brand new community hospital in Potters Bar replaced a building which had stood since the 1930s and which was clearly no longer in the best repair. The new community hospital is a brand new structure. It has excellent facilities offering many new services to my constituents, and the community of Potters Bar is justly proud of it.
Just a little way from Potters Bar, a major redevelopment of Barnet general hospital, long awaited and badly needed, is now being undertaken. I pay tribute to the efforts of my hon. Friend the Member for Chipping Barnet (Mr. Chapman), who is in his place, who long advocated the redevelopment of the hospital. We are pleased that that redevelopment is now taking place.
Let me make the following point about the wider context of the debate.

Mr. Deputy Speaker (Mr. Michael Morris): Order. There is no wider context. The debate is very clear. It is about the future of the QE2 hospital in Welwyn and I should be grateful if the hon. Member addressed that matter.

Mr. Clappison: I beg your pardon, Mr. Deputy Speaker. It was a mistaken way of putting it. The future of Welwyn hospital is tied in with the future of local health services as patients move from one hospital to another.
Clearly, the future of Welwyn hospital has a material impact on my constituents who receive care in other hospitals. The concerns that my hon. Friend the Member for Welwyn Hatfield expressed about the discussion document to which he referred echoed much wider concerns in Hertfordshire. He also spoke for many other people when he referred to the research in that document.
Although I agree with planning health care, those who seek to plan health care must do so on the basis of the best possible research and the fullest consultation, taking into account all views from the public and planning on a long-term basis. I have serious concerns and reservations about whether the document meets those criteria.
In the longer-term context, it is not so long ago that I raised in an Adjournment debate the centralisation of hospital services from St. Albans to Hemel Hempstead. That has been followed by further proposals in the document, while modernisation and major redevelopment is taking place in Hemel Hempstead hospital. I mention that because it shows the importance of planning change in the long term, which is clearly relevant to Welwyn hospital.
I invite my hon. Friend the Minister to note widely felt concerns about the future of Welwyn hospital, the discussion document, planning, and the pace and acceptability of change.

The Parliamentary Under-Secretary of State for Health (Mr. Torn Sackville): My hon. Friend the Member for Welwyn Hatfield (Mr. Evans) is a hard act to follow, so I shall not detain the House. I appreciate the grave importance of the issue that he raised and the strong


feelings that it arouses. That is evidenced by the presence in the Chamber and speeches of my hon. Friends the Members for Broxbourne (Mrs. Roe), who is well known for her expertise in health matters, for Hertfordshire, North (Mr. Heald), for Hertsmere (Mr. Clappison), and for Stevenage (Mr. Wood).
There is no doubt that the QE2 is an excellent hospital. I would have enumerated all its virtues but cannot match the eloquence and ferocity with which they were described by my hon. Friend the Member for Welwyn Hatfield. It can be taken as read that we all agree that the QE2 is an exceptional hospital and serves well the people of Welwyn Hatfield and of surrounding constituencies. It could not have a more powerful champion of its interests than my hon. Friend the Member for Welwyn Hatfield.
When we discuss the future, it must be said that hospital care is changing fast. I refer, for example, to greater use of day care. All kinds of services now provided in hospitals may in future be provided in doctors' surgeries, smaller units or even at home. That is making an enormous difference to the need for larger hospitals and the present number of acute beds. That fast-changing position means that at some time in future, the standard district hospital that we all know and love may not be the paradigm of acute care. Things are changing that fast.
Accident and emergency services are also developing fast. The role of paramedics in ambulance services is a powerful factor for change. Many lives are saved by the attendance of paramedics at serious accidents and emergencies and by the use of high-tech facilities in accident and emergency centres. We are starting to see the role played by what are known in America as trauma centres. The experimental centre at Stoke means that five or six district hospitals may be bypassed in the event of a

serious accident and a patient taken straight to the trauma centre at a hospital providing 24-hour accident and emergency consultant cover.
Apart from full-scale trauma centres, we are seeing the emergence of the need for larger, high-tech accident and emergency centres. They must be accompanied by a full range of acute facilities. We are already witnessing the better outcomes and results of larger accident and emergency centres.
Against that fast-changing background, Hertfordshire health agency produced its discussion document, "Towards a Healthier Hertfordshire", to which my hon. Friend the Member for Welwyn Hatfield and other hon. Friends referred.
I would dissociate myself from one or two details in the remarks of my hon. Friend the Member for Welwyn Hatfield, especially about some current and past servants of the health service. I agree that these are matters that excite powerful emotions and that it is wrong unnecessarily to alarm people about the future of their hospital services.
Having said that, I believe that there may well have to be change not only in Hertfordshire but throughout the country—we are seeing it already in London for reasons that my hon. Friend described so eloquently, and it is long overdue. I can give my hon. Friend the assurances that the Hertfordshire health agency recognises that much work continues to need to be done, that it needs to seek the co-operation and agreement of local trusts in changes that may take place, and that there are currently no plans for changes to accident and emergency provision in the east of Hertfordshire.
Question put and agreed to.
Adjourned accordingly at fifteen minutes to Ten o'clock.